<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998
REGISTRATION NO. 333-49137
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CNB HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
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<S> <C> <C>
GEORGIA 6711 58-2362335
(State or other jurisdiction (Primary Standard Industrial I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
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1303 HIGHTOWER TRAIL, SUITE 130
ATLANTA, GEORGIA 30350
770/650-8262
(Address and telephone number of registrant's principal executive offices)
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H. N. PADGET, JR.
CNB HOLDINGS, INC.
1303 HIGHTOWER TRAIL, SUITE 130
ATLANTA, GEORGIA 30350
(Address and telephone number of agent for service)
---------------------
COPIES TO:
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THOMAS O. POWELL, ESQUIRE RALPH W. DAVIS, ESQUIRE
TROUTMAN SANDERS LLP WALLER LANSDEN DORTCH & DAVIS, PLLC
600 PEACHTREE STREET, N.E., SUITE 5200 511 UNION STREET, SUITE 2100
ATLANTA, GEORGIA 30308 NASHVILLE, TENNESSEE 37219
404/885-3294 615/252-2481
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 27, 1998
PROSPECTUS
900,000 SHARES
(CNB HOLDINGS, INC.(TM) LOGO)
A PROPOSED BANK HOLDING COMPANY FOR
CHATTAHOOCHEE NATIONAL BANK (IN ORGANIZATION)
COMMON STOCK
This Prospectus relates to the offering by CNB HOLDINGS, INC., a Georgia
corporation (the "Company"), of 900,000 shares of its common stock, $1.00 par
value per share (the "Common Stock"), at the purchase price of $10.00 per share
(the "Offering"). The Company is a development stage corporation that has been
organized to hold, upon receipt of regulatory approvals, all of the common stock
of CHATTAHOOCHEE NATIONAL BANK (In Organization) (the "Bank"), Alpharetta,
Georgia. Prior to the Offering, there has been no public trading market for the
Common Stock. See "Underwriting" for information relating to the determination
of the initial offering price. The Company expects that quotations for the
Common Stock will be reported on the OTC Bulletin Board (the "OTC BB") under the
symbol " ." Unless otherwise waived by the Company, any one
investor (together with the investor's affiliates) will be permitted to purchase
a maximum of 45,000 shares ($450,000) of Common Stock.
AN INVESTMENT IN THE COMMON STOCK INVOLVES SIGNIFICANT RISKS. PERSONS
SHOULD NOT INVEST IN THE COMMON STOCK UNLESS THEY CAN AFFORD TO LOSE THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF
CERTAIN OF THE FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF
THE COMMON STOCK OFFERED HEREBY.
---------------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE SAVINGS
ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share........................................... $10.00 $0.825 $9.175
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Total(3)............................................ $9,000,000 $742,500 $8,257,500
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(1) The Company has agreed to indemnify J.C. Bradford & Co. (the "Underwriter")
against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting offering and organizational operating expenses of the
Company. Offering expenses are estimated to be approximately $32,500, and
organizational expenses are estimated to be approximately $150,000.
(3) The Company has granted the Underwriter a 30-day over-allotment option to
purchase up to 135,000 additional shares of Common Stock on the same terms
and conditions as set forth above. If all such shares are purchased by the
Underwriter, the total Price to Public will be $10,350,000, the total
Underwriting Discount will be $853,875, and the total Proceeds to the
Company will be $9,496,125. See "Underwriting."
---------------------
The shares of Common Stock are offered subject to receipt and acceptance by
the Underwriter, to prior sale and to the Underwriter's right to reject orders
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that certificates for the shares of Common Stock will be
available for delivery on or about , 1998.
---------------------
J.C. BRADFORD & CO.
, 1998.
<PAGE> 3
BANK LOCATION
(MAP DEPICTING THE PROPOSED BANK'S PRIMARY MARKET AREA AND SITE OF ITS MAIN
OFFICE)
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING STABILIZING AND SHORT-COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
i
<PAGE> 4
SUMMARY
The following Summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Financial Statements
and the related Notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information contained in this Prospectus assumes (i) no
exercise of the Underwriter's over-allotment option and (ii) a public offering
price of $10.00 per share.
THE COMPANY
The Company was incorporated under the laws of the State of Georgia on
November 5, 1997, primarily to serve as the holding company for the Bank. The
charter application for the Bank received preliminary approval from the Office
of the Comptroller of the Currency (the "OCC") on April 6, 1998, and the Company
filed applications with the Federal Reserve Board through the Federal Reserve
Bank of Atlanta (the "Federal Reserve") and the Department of Banking and
Finance of Georgia (the "Department of Banking") on April 17, 1998 for prior
approval to become a bank holding company. Following such approval and the
approval of the OCC for the Bank to commence business, the Bank will issue all
of its common stock to the Company to raise its required initial capital, and
the Company's initial business will be that of a bank holding company and the
Bank's sole shareholder. The organizers of the Company and the Bank, who will
also serve as directors of the Company and the Bank as described in "Management"
(the "Organizers"), anticipate receiving such approvals during the second and
third quarters of 1998. Such approvals will require the Company to raise
sufficient capital for its needs and to invest at least $9,600,000 of that
capital in the Bank and will contain certain other normal conditions. If
regulatory approvals are not obtained, the Company intends to commence
dissolution proceedings. In this event, shareholders will receive only a
portion, if any, of their original investment. See "Risk Factors -- Failure to
Satisfy Regulatory Conditions" and "Proposed Business of the Company and the
Bank."
THE BANK
The Bank is in the process of being organized as a national bank under the
laws of the United States. The Organizers filed an application with the OCC for
this purpose, which received preliminary approval on April 6, 1998, and another
application with the Federal Deposit Insurance Corporation (the "FDIC") for
deposit insurance, which is pending. The Bank will not be authorized to conduct
its banking business until it obtains a charter from the OCC. The issuance of
the charter will depend, among other things, upon the Bank's receiving
$9,600,000 in capital from the Company and upon compliance with certain standard
conditions expected to be imposed by the FDIC and the OCC which are generally
designed to familiarize the Bank with certain applicable operating requirements
and to prepare the Bank to commence business operations. The OCC requires that a
new national bank complete the organization process and receive final approval
to open for business within 18 months after receipt of preliminary approval from
the OCC. The Bank expects to satisfy all conditions for organizing the Bank and
to open for business during the third quarter of 1998 or as soon thereafter as
practicable. See "Risk Factors -- Failure to Satisfy Regulatory Conditions." The
Bank intends to engage in a general commercial banking business, emphasizing the
banking needs of individuals and small to medium-sized businesses in its primary
service area (the "PSA"). See "Proposed Business of the Company and the Bank."
The Bank's philosophy with respect to its initial operations will be to
emphasize prompt and responsive personal service to the residents of Alpharetta,
Georgia and the other communities located in north Fulton County in order to
attract customers and acquire market share now controlled by other financial
institutions in the Bank's PSA. The Company believes that local ownership and
control will aid the growth and success of the Bank.
The offices of the Company and the Bank will be located at 7855 North Point
Parkway, Suite 200, Alpharetta, Georgia 30022. Pending commencement of
operations, the current principal executive office of the Company and the Bank
is located at: 1303 Hightower Trail, Suite 130, Atlanta, Georgia 30350, and
their telephone number at that address is (770) 650-8262.
1
<PAGE> 5
ORGANIZERS' OFFERING
In a private placement that closed on April 30, 1998 (the "Organizers'
Offering"), the Organizers purchased a total of 200,000 shares of Common Stock
at an aggregate purchase price of $2,000,000 ($10.00 per share).
THE OFFERING
Common Stock offered by the
Company.................. 900,000 shares of Common Stock, par value $1.00 per
share, of the Company
Common Stock to be
outstanding after the
Offering................. 1,100,000 shares(1)
Use of proceeds............ To capitalize the Bank, to pay organizational
expenses of the Company and of the Offering and
to provide working capital for the Company.
The Bank will use the proceeds of the Offering to
pay organizational and pre-opening operating
expenses, including paying officers' and
employees' salaries, to lease, construct and
furnish a site for the Bank's main office and,
following the commencement of business, to
provide working capital to be used for business
purposes, including making loans and other
investments. See "Use of Proceeds."
Proposed OTC Bulletin Board
Symbol................... " "
- ---------------
(1) Does not include shares of Common Stock issuable pursuant to options that
have been or may be granted under the Option Plans of the Company (as
defined herein). See "Management -- Incentive Stock Option Plan, -- Non
Qualified Stock Option Plan."
RECENT DEVELOPMENTS
Based upon preliminary unaudited financial information, the Company had
revenues of $52.00, operating expenses of $118,783 and a pre-tax loss of
$118,731 for the four months ended April 30, 1998. The Company is in the
organizational stage and has no operating history. Therefore, comparative
information is not available.
In the Organizers' Offering, which closed on April 30, 1998, the Organizers
purchased an aggregate of $2,000,000 of Common Stock, resulting in net proceeds
to the Company of $1,967,500, of which $360,000 was used to repay prior capital
contributions of the Organizers. See "Use of Proceeds," "Organizers' Offering"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
2
<PAGE> 6
RISK FACTORS
Investment in the Common Stock involves a significant degree of risk. In
addition to the other information in this Prospectus, the following factors
should be considered carefully in evaluating an investment in the Common Stock
offered hereby. This Prospectus contains "forward-looking statements" relating
to, without limitation, future economic performance, plans and objectives of
management for future operations and projections of revenues and other financial
items that are based on the beliefs of the Organizers and management, as well as
assumptions made by and information currently available to, the Organizers and
management. The words "expect," "estimate," "anticipate," "believe" and similar
expressions and variations thereof are intended to identify forward-looking
statements. The cautionary statements set forth in this "Risk Factors" section
and elsewhere in this Prospectus identify important factors with respect to such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those in such
forward-looking statements. In addition to considering factors set forth
elsewhere in this Prospectus, persons interested in purchasing shares of the
Common Stock should carefully consider the following risks before making a
decision to subscribe. The order of the following is not intended to be
indicative of the relative importance of any described risk nor is the following
intended to be inclusive of all risks of an investment in the Common Stock.
Because the Company is only recently formed and the Bank will only obtain the
necessary regulatory approvals in the future and will not have commenced banking
operations as of the date hereof, prospective investors do not have access to
all of the information that, in assessing their proposed investment, is
available to the purchasers of securities of a financial institution with a
history of operations. The Company's profitability will depend primarily upon
the Bank's operations, and there is no assurance that the Bank will ever operate
profitably. Therefore, persons should not invest in the Common Stock unless they
can afford to lose their entire investment.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
NO OPERATING HISTORY AND ANTICIPATED LOSSES
The Bank, which will initially be the sole subsidiary of the Company and
its only source of income, is in organization and has no operating history on
which to base any estimate of its future prospects. From inception to April 30,
1998, on an unaudited basis, the Company has experienced a cumulative net
operating loss of $147,010, which the Company has funded with the proceeds of
initial capital contributions from the Organizers. This deficit has resulted in
its auditors issuing a comment about the Company's ability to continue as a
going concern unless the Offering is completed. In the event the Offering is not
completed, the Company will be unable to capitalize the Bank, and the Company
will solicit shareholder approval for its dissolution and liquidation under
Georgia law, in which event the Company will distribute to the shareholders its
net assets remaining after payment or provision for payment of all claims
against the Company. The shareholders will receive a return of a portion, if
any, of their original investment, since the proceeds of the Offering and the
Organizers' Offering will have been used to pay all expenses incurred by the
Company, including the expenses of the Offering, the organizational and
pre-opening expenses of the Company and the Bank and the claims of creditors.
The Company's initial profitability will depend entirely upon the Bank's
operations and the Bank's ability to pay dividends to the Company, which is
restricted by law. See "Dividends" and "Supervision and
Regulation -- Dividends." The Bank's proposed operations are subject to risks
inherent in the establishment of a new business and, specifically, of a new
bank. Typically, most new banks incur substantial initial expenses, are not
profitable in the first year of operation and, in some cases, are not profitable
for several years. There can be no assurance that the Bank will ever operate
profitably. Initially, all of the Bank's loans will be unseasoned -- new loans
to new borrowers. Accordingly, it will take several years to determine the
borrowers' payment histories, and the quality of the Bank's loan portfolio
cannot be determined until that time. If the Bank is ultimately unsuccessful,
there is no assurance that shareholders will recover all or any part of their
investment in the Common Stock.
3
<PAGE> 7
INDUSTRY COMPETITION
The banking business is highly competitive. The Bank will compete as a
financial intermediary with numerous other lenders and deposit-takers, including
other commercial banks, savings and loan associations, credit unions, finance
companies, mutual funds, insurance companies and brokerage and investment
banking firms, all of which are actively soliciting business from residents of
north Fulton County, Georgia, and many of which have greater resources than will
be available to the Bank or the Company. See "Proposed Business of the Company
and the Bank -- The Bank."
SUCCESS DEPENDS ON ECONOMIC CONDITIONS
The majority of the Bank's borrowers and depositors are anticipated to be
individuals and businesses located and doing business in the north Fulton County
area. The success of the Bank will depend on the general economic conditions in
the Bank's PSA of north Fulton County, Georgia. Any factors which adversely
affect the north Fulton County economy could adversely affect the performance of
the Bank. Although the Company expects favorable economic development in this
market area, there is no assurance that favorable economic development will
occur or that the Company's expectation of corresponding growth in the Bank's
business will be achieved. See "Proposed Business of the Company and the Bank."
POSSIBLE ADVERSE EFFECT OF MONETARY POLICIES ON SUCCESS OF THE COMPANY
The results of operations of the Bank will be affected by credit policies
of monetary authorities, particularly the Board of Governors of the Federal
Reserve System. There can be no assurance that the effect of actions by monetary
and fiscal authorities, including the Federal Reserve, will not have an adverse
effect on the deposit levels, loan demand or the business and earnings of the
Bank. See "Supervision and Regulation."
DEPENDENCE ON KEY PERSONNEL
H. N. Padget, Jr. has been instrumental in the organization of the Company
and the Bank and will be the key management official in charge of the daily
business operations of the Company and the Bank. The success of the Company and
the Bank may depend upon the continued service of Mr. Padget as the President
and Chief Executive Officer of the Company and the Bank. The Company has entered
into an employment agreement with Mr. Padget, but cannot be assured of his
continued service. See "Management -- Executive Compensation." The Company has
also received a letter from Mr. Padget's former employer threatening possible
legal action, although the Company believes this claim is without merit. See
"Legal Proceedings."
LIMITATION ON GROWTH
At least during the first years of the Bank's operations, the Bank's
legally mandated lending limits will be lower than many of its competitors
because it will initially have less capital than many of its competitors. The
Bank's lower lending limits may discourage potential borrowers who have lending
needs that exceed the Bank's limits, thereby limiting the Bank's ability to
grow. The Bank may seek to serve the needs of such borrowers by selling loan
participations to other institutions, but there can be no assurance that this
strategy will succeed. See "Proposed Business of the Company and the Bank -- The
Bank."
NO DIVIDENDS
The Company will initially have no source of income other than dividends
paid to it by the Bank. The ability of the Company to pay dividends to its
shareholders will therefore depend on the ability of the Bank to pay dividends
to the Company. Bank holding companies and national banks are both subject to
significant regulatory restrictions on the payment of cash dividends. In light
of these restrictions and the need for the Company and the Bank to retain and
build capital, it will be the policy of the Boards of Directors of the Company
and the Bank to reinvest earnings for the period of time necessary to help
ensure the success of their operations. As a result, the Company has no current
plans to initiate the payment of cash dividends, and its future dividend policy
will depend on the Company's and the Bank's earnings, capital requirements,
financial
4
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condition and other factors considered relevant by the Boards of Directors of
the Company and the Bank. See "Dividends" and "Supervision and
Regulation -- Dividends."
NO PUBLIC MARKET; OFFERING PRICE ARBITRARILY DETERMINED
Prior to the Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that an active trading market will
develop or continue following the Offering or that the market price of the
Common Stock will not decline below the initial public offering price. Since the
Company is only recently formed and the Bank is in the process of being
organized, the initial public offering price of $10.00 per share was determined
by negotiations between the Company and the Underwriter based on several
factors, including the need to raise sufficient capital to complete organization
and commence operations. Because the price was not set with reference to
traditional measures of equity valuation (such as book value, earnings power,
discounted cash flow, etc.), the offering price may not be indicative of the
market price for the Common Stock after the Offering. See "Underwriting."
POSSIBLE VOLATILITY OF MARKET PRICE
If a market develops for the Common Stock after the Offering, the price for
the Common Stock will be determined in the market and may be influenced by many
factors, including the depth and liquidity of the market for the Common Stock,
investor perception of the Company, the Company's industry as a whole and
general economic and market conditions. Quarterly operating results of the
Company, changes in earnings estimated by analysts, changes in general
conditions in the economy or the financial markets or other developments
affecting the Company could cause the market price of the Common Stock to
fluctuate substantially. In addition, the stock market from time to time
experiences extreme price and volume fluctuations. This volatility has a
significant effect on the market prices of securities, often for reasons
unrelated to the operating performance of issuers. Therefore, from time to time
after the Offering, there may be significant volatility in the market price of
the Common Stock.
CHANGES IN INDUSTRY REGULATIONS
The potential success or failure of the Bank will depend not only upon
competitive factors, but also upon state and federal regulations affecting banks
and bank holding companies generally. Regulations now affecting the Company and
the Bank may be changed at any time, and there is no assurance that such changes
will not adversely affect the business of the Company and the Bank. See
"Supervision and Regulation."
DILUTION
The purchasers of the Common Stock offered hereby will experience immediate
and significant dilution of $.84 per share, the amount by which the purchase
price of the Common Stock offered hereby will exceed the net tangible book value
of the Common Stock immediately following the Offering. Also, the Common Stock
is not subject to preemptive rights, which means that the owners of the Common
Stock are not entitled to purchase additional shares of Common Stock if Common
Stock is offered to others. As a result, the interest in the Company of owners
of the Common Stock will be diluted if additional Common Stock is sold or issued
pursuant to options, warrants or convertible securities, including pursuant to
the Option Plans of the Company (as defined herein). See "Dilution."
FAILURE TO SATISFY REGULATORY CONDITIONS
If the Company satisfies the Offering conditions and issues the shares of
Common Stock, but final approval for the Bank to commence banking operations is
not granted within 18 months after the receipt of preliminary approval from the
OCC or other regulatory requirements are not satisfied, the Company will solicit
shareholder approval for its dissolution and liquidation under Georgia law, in
which event the Company will distribute to the shareholders its net assets
remaining after payment or provision for payment of all claims against the
Company. The shareholders will receive a return of only a portion, if any, of
their original investment, since the proceeds of the Offering and the
Organizers' Offering will have been used to pay all
5
<PAGE> 9
expenses incurred by the Company, including the expenses of the Offering, the
organizational and pre-opening expenses of the Company and the Bank and the
claims of creditors.
POTENTIAL CONTROL BY DIRECTORS AND OFFICERS
After the Offering, the directors and officers of the Company will own
approximately 18.2% of the outstanding Common Stock (approximately 16.2% if the
Underwriter's over-allotment option is exercised in full). These persons may
acquire additional shares of Common Stock in the Offering or thereafter which
will increase such percentage. As a result, the directors and officers taken
together may effectively be able to control the outcome of director elections
and have control over the course of the Company's future activities. See
"Management -- Company Officers and Directors; Proposed Bank Officers and
Directors."
RISKS ASSOCIATED WITH THE YEAR 2000
Like many financial institutions, the Company and the Bank will rely upon
computers for the daily conduct of their business and for information systems
processing. There is concern among industry experts that on January 1, 2000
computers will be unable to "read" the new year, and there may be widespread
computer malfunctions. The Company and the Bank will generally rely on software
and hardware developed by independent third parties to provide the information
systems used by the Company and the Bank. The Company intends to seek assurances
about the Year 2000 compliance with respect to any third party hardware or
software systems it intends to use. The Company is currently negotiating with
software providers to assist it in this regard. The Company believes that its
internal systems and software and the network connections it will maintain will
be adequately programmed to address the Year 2000 issue. Based on information
currently available, management does not believe that the Company or the Bank
will incur significant costs in connection with the Year 2000 issue.
Nevertheless, there can be no assurances that all hardware and software that
either the Company or the Bank uses will be Year 2000 compliant, and the Company
cannot predict with any certainty the costs the Company or the Bank will incur
to respond to any Year 2000 issues. Further, the business of many of the Bank's
customers may be negatively affected by the Year 2000 issue, and any financial
difficulties incurred by the Bank's customers in solving Year 2000 issues could
negatively affect such customer's ability to repay any loans which the Bank may
have extended. Therefore, even if the Company and the Bank do not incur
significant direct costs in connection with responding to the Year 2000 issue,
there can be no assurance the failure or delay of the Bank's customers or other
third parties in addressing the Year 2000 issue or the costs involved in such
process will not have a material adverse effect on the Bank's business,
financial condition and result of operations.
DETERRENT EFFECT OF ANTITAKEOVER PROVISIONS
The Articles of Incorporation and the Bylaws of the Company contain certain
provisions that may deter an attempt to change or gain control of the Company.
As a result, the shareholders of the Company may be deprived of opportunities to
sell some or all of their shares at prices that represent a premium over market
prices. See "Description of Capital Stock of the Company -- Certain Provisions
of the Articles of Incorporation and Bylaws."
LIMITED BANKING EXPERIENCE OF CERTAIN DIRECTORS
While several of the directors of the Company and proposed directors of the
Bank have significant banking experience and familiarity with the Bank's PSA,
certain of the directors have limited experience in the banking industry. As a
result, such directors may lack the experience necessary to provide sufficient
guidance to the Company and the Bank. See "Management -- Company Officers and
Directors; Proposed Bank Officers and Directors."
ORGANIZERS' OFFERING
In the Organizer's Offering, which closed on April 30, 1998, the Organizers
purchased a total of 200,000 shares of Common Stock at an aggregate purchase
price of $2,000,000 ($10.00 per share).
6
<PAGE> 10
USE OF PROCEEDS
BY THE COMPANY
The net proceeds of the Offering to the Company are estimated to be
$8,257,500 ($9,496,125 if the Underwriter's over-allotment option is exercised
in full) after deducting underwriting discounts and commissions. The Company
will use approximately $150,000 of the net proceeds to pay organizational and
Offering expenses of the Company and the Bank. The Company's organizational and
Offering expenses will consist primarily of legal, accounting, marketing and
printing expenses. Thereafter, the Company will use the net proceeds of the
Offering, together with the net proceeds of the Organizers' Offering, to
purchase all of the common stock of the Bank for a minimum of $9,600,000. Funds
then remaining, estimated at $115,000 ($1,353,625 if the Underwriter's
over-allotment option is exercised in full), will be retained by the Company for
working capital and other general purposes, including payment of expenses of the
Company and the provision of additional capital for the Bank, or the purchase of
certificates of deposit of the Bank, if necessary or deemed desirable by the
Company. In addition, the Company will be reimbursed by the Bank for amounts
advanced by the Company to the Bank for pre-opening and organizational expenses
of the Bank. See "-- By the Bank."
The following table sets forth the use of the gross proceeds of the
Offering and the Organizers' Offering by the Company.
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DOLLAR
AMOUNTS PERCENTAGE
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<S> <C> <C>
Without Over-Allotment Option:
Gross Proceeds from Organizers' Offering.................... $ 2,000,000 18.2%
Repayment of Organizers' Contributions...................... (360,000) (3.3)
Offering Expenses........................................... (32,500) (.3)
----------- -----
Net Proceeds from Organizers' Offering...................... 1,607,500 14.6
Gross Proceeds from Offering................................ 9,000,000 81.8
Sales Agent's Commission.................................... (742,500) (6.7)
Organizational Expenses..................................... (150,000) (1.4)
Capitalization of the Bank.................................. (9,600,000) (87.3)
----------- -----
Remaining Proceeds.......................................... $ 115,000 1.0%
=========== =====
With Over-Allotment Option:
Gross Proceeds from Organizers' Offering.................... $ 2,000,000 16.2%
Repayment of Organizers' Contributions...................... (360,000) (2.9)
Offering Expenses........................................... (32,500) (.3)
----------- -----
Net Proceeds from Organizers' Offering...................... 1,607,500 13.0
Gross Proceeds from Offering if Over-Allotment Option is
Exercised in Full......................................... 10,350,000 83.8
Sales Agent's Commission.................................... (853,875) (6.9)
Organizational Expenses..................................... (150,000) (1.2)
Capitalization of the Bank.................................. (9,600,000) (77.7)
----------- -----
Remaining Proceeds.......................................... $ 1,353,625 11.0%
=========== =====
</TABLE>
BY THE BANK
The Bank will receive a minimum of $9,600,000 from the issuance of its
common stock to the Company. The Bank will use approximately $350,000 of such
proceeds to reimburse the Company for amounts advanced by the Company to pay
organizational expenses, estimated at $100,000, and pre-opening expenses,
estimated at $250,000, of the Bank. Organizational expenses of the Bank include
consulting fees, expenses for market analysis and feasibility studies, and legal
fees and expenses. Pre-opening expenses of the Bank include officers' and
employees' salaries and benefits estimated at $100,000 (assuming the Bank opens
for business on its target
7
<PAGE> 11
date of July 1, 1998), as well as lease payments, marketing expenses, interest
expenses, accounting and other pre-opening expenses. For additional information
concerning the compensation of the President and Chief Executive Officer of the
Company and the Bank, see "Management -- Executive Compensation." The Bank will
also use approximately $250,000 of such proceeds to purchase or lease furniture,
fixtures and equipment for Bank's principal facility and $75,000 for leasehold
improvements to such facility. The balance of the proceeds to be received by the
Bank, estimated at approximately $8,925,000, will be used for loans to
customers, investments and other general corporate purposes.
In the opinion of the Company, the estimated net proceeds of approximately
$8,257,500 to the Company from the Offering and the remaining proceeds of the
Organizers' Offering should satisfy the cash requirements of the Company and the
Bank for their respective twelve months of operations, and the Company and the
Bank should not need to raise additional funds for operations during this
period, but there can be no assurance that this will be the case.
DILUTION
At April 30, 1998, the net tangible book value of the Company was
approximately $1.82 million, or $9.10 per share of Common Stock. Net tangible
book value per share represents the amount of the Company's total tangible
assets less total liabilities, divided by the number of shares of Common Stock
outstanding.
After giving effect to the issuance and sale by the Company of the 900,000
shares of Common Stock offered hereby at an initial public offering price of
$10.00 per share and after deducting the estimated underwriting discount and
offering expenses payable by the Company and the receipt by the Company of
approximately $8,257,500 in net proceeds, the pro forma net tangible book value
of the Company at April 30, 1998, would have been approximately $10.075 million,
or $9.16 per share of Common Stock. This represents an immediate increase in pro
forma net tangible book value of $.06 per share to the Organizers and an
immediate dilution in net tangible book value of $.84 per share to purchasers of
Common Stock in the Offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $10.00
Net tangible book value prior to the Offering............... $9.10
Increase in net tangible book value attributable to new
investors................................................. .06
-----
Pro forma net tangible book value after the Offering........ 9.16
------
Dilution in net tangible book value to new investors........ $ .84
======
</TABLE>
The following table summarizes, at April 30, 1998, the number of shares of
Common Stock issued by the Company, the total consideration paid to the Company
and the average price per share paid to the Company by existing shareholders and
by the new investors purchasing shares of Common Stock in the Offering at an
initial public offering price of $10.00 per share and before deduction of
estimated underwriting discount and offering expenses payable by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders............... 200,000 18% $ 2,000,000 18% $10.00
New investors....................... 900,000 82 9,000,000 82 10.00
--------- --- ----------- ---
Total(1).................. 1,100,000 100% $11,000,000 100%
========= === =========== ===
</TABLE>
- ---------------
(1) Does not include shares of Common Stock issuable pursuant to options that
have been or may be granted under the Option Plans of the Company (as
defined herein). See "Management -- Incentive Stock Option Plan, -- Non
Qualified Stock Option Plan."
The Company's Board of Directors and initial shareholders have adopted an
Incentive Stock Option Plan (the "Incentive Stock Option Plan") whereby stock
options may be granted to employees who are contributing significantly to the
management or operation of the business of the Company or its subsidiaries as
8
<PAGE> 12
determined by the committee administering the Incentive Stock Option Plan. The
Company's Board of Directors and initial shareholders have also adopted an
Amended and Restated Non Qualified Stock Option Plan (the "Non Qualified Stock
Option Plan" and, together with the Incentive Stock Option Plan, the "Option
Plans"). The Option Plans permit the Company to grant options to certain key
officers and employees of the Company and the Bank. The Company has reserved
100,000 shares of Common Stock for issuance upon the exercise of outstanding
stock options under the Option Plans. The options authorized under the Incentive
Stock Option Plan include the options the Company will be obligated to issue to
Mr. Padget under the terms of his employment agreement. See
"Management -- Employment Agreement." Exercise of these options could have a
dilutive effect on the shareholders' interest in the Company's earnings and book
value. In addition, the Company may issue additional stock options, shares of
Common Stock or preferred stock in the future. Any such stock offering by its
nature could be dilutive to the holdings of purchasers in the Offering.
9
<PAGE> 13
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
April 30, 1998 and the pro forma consolidated capitalization of the Company and
the Bank, as adjusted to give effect to the sale of 900,000 shares of Common
Stock in the Offering.
<TABLE>
<CAPTION>
AS OF APRIL 30, 1998
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Current maturities of long-term debt and capital lease
obligations............................................... $ 11,700 $ 11,700
Long-term debt, less current maturities..................... 42,854 42,854
---------- -----------
Total long-term debt.............................. $ 54,554 $ 54,554
========== ===========
Shareholders' Equity:
Common Stock, par value $1.00 per share: 10,000,000 shares
authorized; 200,000 shares issued and outstanding;
1,100,000 shares issued ($10 each) and outstanding as
adjusted(1)............................................... $ 200,000 $ 1,100,000
Preferred Stock, par value not stated; 10,000,000 shares
authorized, no shares issued and outstanding.............. -- --
Additional paid-in capital(2)............................... 1,767,500 9,125,000
Accumulated deficit(3)...................................... (147,000) (150,000)
---------- -----------
Total shareholders' equity........................ $1,820,500 $10,075,000
========== ===========
Total Capitalization.............................. $1,875,054 $10,129,554
========== ===========
</TABLE>
- ---------------
(1) Does not include shares of Common Stock issuable pursuant to options that
have been or may be granted under the Option Plans. See
"Management -- Incentive Stock Option Plan, -- Non Qualified Stock Option
Plan."
(2) The underwriting discount and expenses of the Offering will be charged
against this account. These expenses are estimated to be $742,500 and
$32,500, respectively, and such amount was used in the calculation of the
amount shown in the "As Adjusted" column.
(3) The "As Adjusted" deficit accumulated during the pre-opening stage results
from expensing estimated pre-opening expenses for the Bank of $150,000.
These expenses consist primarily of operational expenses, salaries and
employee benefits. See "Use of Proceeds -- By the Bank." Pre-opening
expenses will be charged against operating results and are estimates. Actual
pre-opening expenses may be higher. Higher actual pre-opening expenses would
increase the deficit accumulated during the pre-opening stage and thereby
further reduce shareholders' equity.
10
<PAGE> 14
DIVIDENDS
The Company will initially have no source of income other than dividends
paid to it by the Bank. The ability of the Company to pay dividends to its
shareholders will therefore depend on the ability of the Bank to pay dividends
to the Company. Bank holding companies and national banks are both subject to
significant regulatory restrictions on the payment of cash dividends. In light
of these restrictions and the need for the Company and the Bank to retain and
build capital, it will be the policy of the Boards of Directors of the Company
and the Bank to reinvest earnings for the period of time necessary to help
ensure the success of their operations. As a result, the Company has no current
plans to initiate the payment of cash dividends, and its future dividend policy
will depend on the Company's and the Bank's earnings, capital requirements,
financial condition and other factors considered relevant by the Boards of
Directors of the Company and the Bank.
The Bank will be restricted in its ability to pay dividends under the
national banking laws and by regulations of the OCC. The Company and the Bank
are subject to various general regulatory policies and requirements relating to
the payment of dividends, including requirements to maintain capital above
regulatory minimums. The appropriate regulatory authority is authorized to
determine, under certain circumstances relating to the financial condition of
the Bank or the Company, that the payment of dividends would be an unsafe or
unsound practice and to prohibit payment thereof. See "Supervision and
Regulation -- Dividends."
11
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
financial statements and related notes included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
The Company was organized on November 5, 1997, to serve as a holding
company for a proposed national bank. Since inception, the main activities of
the Company have centered on seeking, interviewing and selecting
organizers/directors, applying for a national bank charter, applying for FDIC
deposit insurance, applying to become a bank holding company and raising equity
capital through the Organizers' Offering and this Offering.
In the Organizers' Offering, which closed on April 30, 1998, the Organizers
purchased a total of 200,000 shares of Common Stock at an offering price of
$10.00 per share. Net of offering expenses, the Company raised $1,967,500 in the
Organizers' Offering.
During the development stage, from November 5, 1997 ("Inception") to
December 31, 1997, the net loss amounted to $28,279. As of and for the
four-month period ended April 30, 1998, the net loss amounted to $118,731.
NET INTEREST INCOME
Since the Company has primarily been in the organizational stage, there are
no results to present at this time. The Company's results of operations will be
determined primarily by the Bank. The Bank's results of operations will be
determined by its ability to manage effectively interest income and expense, to
minimize loan and investment losses, to generate noninterest income and to
control noninterest expense. Since interest rates are determined by market
forces and economic conditions beyond the control of the Bank, the ability to
generate net interest income is dependent upon the Bank's ability to maintain an
adequate spread between the rate earned on earning assets and the rate paid on
interest-bearing liabilities, such as deposits and borrowings. Thus, net
interest income is the key performance measure of income.
NONINTEREST INCOME
Since the Company has primarily been in the organizational stage, there are
no results to present at this time. Accordingly, there was no noninterest income
for the four-month period ended April 30, 1998. The Bank will generate
noninterest income primarily through service charges to customers and should
begin generating noninterest income when it begins operations. Management
expects noninterest income as a percentage of average assets to improve
significantly in 1998 and 1999, but does not expect it to be a significant
source of income.
NONINTEREST EXPENSE
Noninterest expense for the four-month period ended April 30, 1998,
amounted to $118,783. As a percentage of total average assets, noninterest
expense amounted to 8.0%. Below are the components of noninterest expense for
the four-month period ended April 30, 1998:
<TABLE>
<S> <C>
Salaries and benefits....................................... $ 89,840
Legal and professional...................................... 2,166
Other operating expenses.................................... 26,777
--------
Total noninterest expense................................... $118,783
========
</TABLE>
12
<PAGE> 16
LIQUIDITY AND INTEREST RATE SENSITIVITY
Since the Company has primarily been in the organizational stage, there are
no results to present at this time. Nevertheless, once the Bank commences
operations, net interest income, the Company's primary source of earnings, will
fluctuate with significant interest rate movements. To lessen the impact of
these margin swings, the balance sheet should be structured so that repricing
opportunities exist for both assets and liabilities in roughly equivalent
amounts at approximately the same time intervals. Imbalances in these repricing
opportunities at any point in time constitute interest rate sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The rate sensitive
position, or gap, is the difference in the volume of rate sensitive assets and
liabilities at a given time interval. The general objective of gap management is
to manage actively rate sensitive assets and liabilities so as to reduce the
impact of interest rate fluctuations on the net interest margin. Management will
generally attempt to maintain a balance between rate sensitive assets and
liabilities as the exposure period is lengthened to minimize the Company's
overall interest rate risks.
The asset mix of the balance sheet is to be continually evaluated in terms
of several variables: yield, credit quality, appropriate funding sources and
liquidity. To effectively manage the liability mix of the balance sheet, there
should be a focus on expanding the various funding sources.
As the Company continues to grow, management will continuously structure
its rate sensitivity position to best hedge against rapidly rising or falling
interest rates. The Bank's asset/liability committee will meet on a quarterly
basis to develop management's strategy for the upcoming period. Such strategy
includes anticipations of future interest rate movements.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. These funds can be obtained by converting assets to cash or by
attracting new deposits. The Company's primary source of liquidity will come
from its ability to maintain and increase deposits through the Bank.
Cash and cash equivalents are the primary source of liquidity as of April
30, 1998. At April 30, 1998, cash and cash equivalents amounted to $2.3 million,
representing 89% of total assets.
Management knows of no trends, demands, commitments, events or
uncertainties that should result in or are reasonably likely to result in the
Company's liquidity increasing or decreasing in any material way in the
foreseeable future, other than the Offering.
CAPITAL ADEQUACY
There are now two primary measures of capital adequacy for banks and bank
holding companies: (i) risk-based capital guidelines and (ii) the leverage
ratio.
The risk-based capital guidelines measure the amount of a bank's required
capital in relation to the degree of risk perceived in its assets and its
off-balance-sheet items. Note that under the risk-based capital guidelines,
capital is divided into two "tiers." Tier 1 capital consists of common
shareholders' equity, noncumulative and cumulative (bank holding companies only)
perpetual preferred stock and minority interest. Goodwill is subtracted from the
total. Tier 2 capital consists of the allowance for loan losses, hybrid capital
instruments, term subordinated debt and intermediate term preferred stock. Banks
are required to maintain a minimum risk-based capital ratio of 8.0%, with at
least 4.0% consisting of Tier 1 capital.
The second measure of capital adequacy relates to the leverage ratio. The
OCC has established a 3.0% minimum leverage ratio requirement. Note that the
leverage ratio is computed by dividing Tier 1 capital into total assets. For
banks that are not rated CAMEL 1 by their primary regulator, (which includes the
Bank), the minimum leverage ratio should be 3.0% plus an additional cushion of
at least 1 to 2%, depending upon risk profiles and other factors.
13
<PAGE> 17
A new rule was recently adopted by the Federal Reserve, the OCC and the
FDIC that adds a measure of interest rate risk to the determination of
supervisory capital adequacy. In connection with this new rule, the agencies
have also proposed a measurement process to measure interest rate risk. Under
this proposal, all items reported on the balance sheet, as well as
off-balance-sheet items, would be reported according to maturity, repricing
dates and cash flow characteristics. A bank's reporting position would be
multiplied by duration-based risk factors and weighted according to rate
sensitivity. The net risk weighted position would be used in assessing capital
adequacy. The objective of this complex proposal it to determine the sensitivity
of a bank to various rising and declining interest rate scenarios.
The table below illustrates the Company's regulatory capital ratios at
April 30, 1998:
<TABLE>
<CAPTION>
MINIMUM
REGULATORY
APRIL 30, 1998 REQUIREMENT
-------------- -----------
<S> <C> <C>
Tier 1 capital.............................................. 99.9% 4.0%
Tier 2 capital.............................................. -- --
---- ---
Total risk-based capital ratio.................... 99.9% 8.0%
==== ===
Leverage ratio.................................... 71.4% 3.0%
==== ===
</TABLE>
The above ratios indicate that the capital position of the Company is sound
and that the Company is well positioned for future growth.
14
<PAGE> 18
PROPOSED BUSINESS OF THE COMPANY
AND THE BANK
THE COMPANY
The Company was incorporated as a business corporation under the laws of
the State of Georgia on November 5, 1997, primarily to serve as a bank holding
company by capitalizing the Bank with $9,600,000. As a result, the Bank will
issue all of its common stock to the Company, and the Company will be the Bank's
sole shareholder. Initially, the Bank will be the sole operating subsidiary of
the Company. On April 17, 1998, the Company applied to the Federal Reserve and
the Department of Banking for prior approval to capitalize the Bank, and such
applications are pending. If such approvals are granted, upon the receipt of the
common stock of the Bank, the Company will become a bank holding company within
the meaning of the Bank Holding Company Act of 1956, as amended (the "BHCA"),
and the Georgia Bank Holding Company Act (the "Georgia BHC Act"). See
"Supervision and Regulation -- Bank Holding Company Regulation."
The Company has been organized to facilitate the Bank's ability to serve
its future customers' requirements for financial services. The holding company
structure will provide flexibility for expansion of the Company's banking
business through the possible acquisition of other financial institutions and
the provision of additional capital and banking-related services which are
permissible for bank holding companies but not for national banks. A holding
company structure will facilitate the future raising of capital for the Bank
because the Company will be able to issue securities without the need for prior
banking regulatory approval and the proceeds of debt securities issued by the
Company can be invested in the Bank as primary capital.
The Company has no present plans to acquire any operating subsidiaries
other than the Bank. It is expected, however, that the Company may make
additional acquisitions in the future in the event that the Company becomes
profitable and such acquisitions are deemed to be in the best interest of the
Company and its shareholders. Such acquisitions, if any, will be subject to
certain regulatory approvals and requirements. See "Supervision and Regulation."
THE BANK
General. The Organizers filed applications on behalf of the Bank with the
OCC and with the FDIC on December 8, 1997 for authority to organize as a
national bank, the deposits of which will be federally insured, and to conduct a
commercial banking business from Alpharetta, Georgia. The Bank will not be
authorized to conduct its banking business until it obtains a charter from the
OCC. The charter application for the Bank received preliminary approval from the
OCC on April 6, 1998, and the application with the FDIC is pending. The issuance
of the charter will depend, among other things, upon the Bank's receiving at
least $9,600,000 in capital from the Company and upon compliance with certain
standard conditions expected to be imposed by the FDIC and the OCC which are
generally designed to familiarize the Bank with certain applicable operating
requirements and to prepare the Bank to commence business operations. The OCC
requires that a new national bank open for business (i.e., obtain a charter)
within 18 months after receipt of preliminary approval from the OCC.
Philosophy. The Bank's philosophy with respect to its initial operations
will be to emphasize prompt and responsive personal service to the residents of
Alpharetta, Georgia and the other communities located in north Fulton County in
order to attract customers and acquire market share now controlled by other
financial institutions in the Bank's market area. The Company believes that
local ownership and control will aid the growth and success of the Bank.
Management of the Bank intends to implement an active officer and director
call program to promote these efforts. The purpose of this call program will be
to describe the products, services and philosophy of the Bank to both existing
and new business prospects. Most of the officers and directors of the Company
are active members in the north Fulton community, and their continued active
community involvement will provide an opportunity to promote the Bank and its
products and services. The officers and directors of the Company intend to
utilize effective advertising and selling efforts in order to build a distinct
institutional image for the Bank and to capture a customer base.
15
<PAGE> 19
Bank Location and Facilities. The Bank will be located in Alpharetta,
Georgia in Fulton County. The Bank site is located on the east side of Georgia
Highway 400 at the intersection of Mansell Road and North Point Parkway. The
building is currently under construction. The building will be a one-story brick
facility which will house three businesses. The Bank will have the central
location with a small business on each side. The Bank will occupy 3,639 square
feet of the total 19,600 square feet of the building. The space to be occupied
by the Bank is being built out to the Bank's specifications.
This location offers high visibility in a high traffic area just south of
North Point Mall. The Bank site will be neighbor to a large retail power center.
This area is the central location for business, residential, commuting and
shopping in north Fulton County with proximity to Georgia Highway 400.
The Bank entered into a Shopping Center Form Lease (the "Lease") dated
March 23, 1998, which provides that the Bank may lease the building for a term
of five years beginning April 1, 1998. The Lease provides that the Bank has the
option to renew the Lease for two additional three-year terms. The lessor also
required that a $70,000 irrevocable standby letter of credit be provided to
begin the Company's build-out of the property. This irrevocable standby letter
of credit expires on October 27,1998 and is secured by a $70,000 certificate of
deposit purchased by the Company.
Primary Service Area. The Bank's PSA represents a geographic area which
includes Sandy Springs, Dunwoody, Roswell and Alpharetta. The boundaries of the
PSA are represented by the Fulton County/ Forsyth County line on the north, the
Fulton County/Gwinnett County line on the east, Interstate 285 on the south and
the Fulton County/Cobb County line on the west. Areas of the PSA are located
within 15 to 30 minutes drive time from Buckhead and downtown Atlanta and 30 to
45 minutes drive time from the north Georgia mountains and Lake Lanier.
Economic and Demographic Factors. The PSA represents a diverse suburban
market made up of older home communities, new golf club communities, municipal
facilities, two major shopping malls, numerous dining amenities, growing public
and private schools, headquarter locations of major national and international
companies and numerous small businesses. The cities of Alpharetta and Roswell
are the key economic focal points of the PSA. According to estimates released by
the U.S. Census Bureau on November 18, 1997, Alpharetta ranked second in Georgia
in terms of population growth between 1990 and 1996, representing a 57.5%
change. Roswell ranked twelfth with a population change of 15.6%. The aggregate
population of the PSA reported by the U.S. Census totaled 182,502 in 1990, is
estimated to be 232,098 in 1996 and is projected to be 264,672 by 2001. The
median family income was $78,592 for 1996 and is projected to be $92,983 by
2001. The median age of the adult population is 42.6 years.
The strength of the economy in north Fulton County relies on its large,
diversified small business community. The small business community makes up 85%
of the membership of the Greater North Fulton Chamber of Commerce. Another
significant economic factor of the PSA is the shopping and retail establishments
located at North Point Mall. The one mile stretch of land located east of
Georgia Highway 400 between Mansell Road and Haines Bridge Road represents one
of the largest commercial retail shopping areas in Georgia. Its major focal
point is North Point Mall, which is anchored by six major department stores and
180 specialty shops. The Bank will be located at the southern entrance of this
retail/commercial area.
Competition. The banking business is highly competitive. The Bank will
compete as a financial intermediary with other commercial banks, savings and
loan associations, credit unions, and money market mutual funds operating in the
Atlanta area. As of March 30, 1998, the north Fulton County area was served by 9
commercial banks with a total of 60 offices. A number of these competitors are
well established in the north Fulton County area. Most of them have
substantially greater resources and lending limits than the Bank and other
certain services, such as extensive and established branch networks and trust
services, that the Bank does not expect to provide initially. As a result of
these competitive factors, the Bank may have to pay higher rates of interest to
attract deposits or extend less favorable terms (including lower interest) to
attract loans.
The regional bank holding companies represented in the PSA are:
NationsBank, N.A., which is the largest with a deposit market share of 26.63%,
Wachovia Bank of Georgia with the second largest market share of 14.40%, First
Union National Bank of Georgia, SunTrust Bank, SouthTrust Bank of Georgia,
Regions
16
<PAGE> 20
Bank and Colonial Bank. The larger regional banks' presence in the Bank's PSA is
through branch offices, with many of the customer service functions, as well as
authority for loan approval, being located outside of the Bank's PSA. There are
several community banks located in the Bank's PSA; however, the Bank intends to
differentiate itself from these banks primarily through personal service and
strong involvement in the north Fulton County community. There are also two
other de novo banks in the Bank's PSA.
Historical Deposit Trends. The following table shows a comparison of
deposit mix between the two independent community banks in the Bank's PSA (the
"PSA Peer Banks") and the de novo banks chartered since 1995 in the state of
Georgia:
<TABLE>
<CAPTION>
PEER GROUP DEPOSIT MIX
---------------------------------
PSA PEER GEORGIA DE NOVO PEER
BANKS BANKS
-------- ---------------------
<S> <C> <C>
Demand deposits....................................... 18% 11%
Interest checking..................................... 8% 18%
MMA and savings....................................... 18% 17%
Time accounts......................................... 56% 54%
</TABLE>
Lending Policy. The Bank intends to emphasize a range of lending services,
including commercial, real estate and consumer loans, to small-to medium-sized
businesses and professional concerns and individuals that are located in or
conduct a substantial portion of their business in the Bank's PSA.
Loan Approval and Review. The Bank's loan approval policies have not been
established, but will provide for various levels of officer lending authority.
When the amount of aggregate loans to a single borrower exceeds that individual
officer's lending authority, the loan request will be considered and approved by
an officer with a higher lending limit or the Loan Committee. The Bank will not
make any loans to any director or executive officer of the Bank unless the loan
is approved by the Board of Directors of the Bank and is made on terms not more
favorable to such person than would be available to a person not affiliated with
the Bank and otherwise will comply with applicable law.
Lending Limits. The Bank's lending activities will be subject to a variety
of lending limits imposed by federal law. While differing limits apply in
certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general, the Bank will
be subject to a loan-to-one-borrower limit of an amount equal to 15% of the
Bank's unimpaired capital and surplus or 25% of the unimpaired capital and
surplus if the excess over 15% is within the guidelines set forth in 12 U.S.C.
Section 84 as an exception to the 15% limit. Based on the proposed minimum
initial capitalization of the Bank and its projected pre-opening expenses, the
Bank's initial lending limit will be approximately $1,365,000 for loans not
fully secured plus an additional $910,000 (or an aggregate of approximately
$2,275,000) for loans which meet the 12 U.S.C. Section 84 guidelines. The Bank
has not yet established any minimum or maximum loan limits other than the
statutory lending limits described above. These limits will increase or decrease
as the Bank's capital increases or decreases as a result of the Bank's earnings
or losses, among other reasons. Unless the Bank is able to sell participations
in its loans to other financial institutions, the Bank will not be able to meet
all of the lending needs of loan customers requiring aggregate extensions of
credit above these limits.
Consumer Loans. The Bank will make a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment and
term loans, home equity loans and lines of credit, and revolving lines of credit
such as credit cards. These loans typically will carry balances of less than
$25,000 and, in the case of non-revolving loans, be amortized over a period not
exceeding 60 months, in many cases bearing interest at a fixed rate. The
revolving loans will typically bear interest at a fixed rate and require monthly
payments of interest and a portion of the principal balance. The underwriting
criteria for home equity loans and lines of credit will generally be the same as
applied by the Bank when making a first mortgage loan, as described above, and
home equity lines of credit will typically expire ten years or less after
origination. As with the other categories of loans, the principal economic risk
associated with consumer loans is the creditworthiness of the Bank's borrowers.
Borrower creditworthiness is affected by general economic conditions, including
unemployment rates, interest rates, consumer bankruptcy rates and levels of
consumer
17
<PAGE> 21
spending. The principal competitors for consumer loans will be the established
banks in the north Fulton County area.
Real Estate Loans. The Bank will make commercial real estate loans,
construction and development loans, and residential real estate loans in and
around the Bank's PSA. These loans include certain commercial loans where the
Bank takes a security interest in real estate out of an abundance of caution and
not as the principal collateral for the loan, but will exclude home equity
loans, which are classified as consumer loans. Loan terms generally will be
limited to five years or less, although payments may be structured on a longer
amortization basis. Interest rates may be fixed or adjustable. The Bank will
generally charge an origination fee. Management will attempt to reduce credit
risk in the commercial real estate portfolio by emphasizing loans on
owner-occupied office and retail buildings where the loan-to-value ratio,
established by independent appraisals, does not exceed 80%. In addition, the
Bank may require personal guarantees of the principal owners of the property
backed with a review by the Bank of the personal financial statements of the
principal owners. The principal economic risk associated with each category of
anticipated loans, including real estate loans, is the creditworthiness of the
Bank's borrowers. The risks associated with real estate loans vary with many
economic factors, including employment levels and fluctuations in the value of
real estate, new job creation trends, tenant vacancy rates and the quality of
the borrower's management. The Bank will compete for real estate loans with a
number of bank competitors which are well established in the Bank's PSA. Most of
these competitors have substantially greater resources and lending limits than
the Bank. As a result, the Bank may have to charge lower interest rates to
attract borrowers.
The Bank may also originate mortgage loans for sale into the secondary
market. The Bank intends to limit interest rate risk and credit risk on these
loans by locking the interest rate for each loan with the secondary investor and
receiving the investor's underwriting approval prior to originating the loan.
Commercial Loans and Leases. It is expected that loans for commercial
purposes in various lines of businesses will be one of the primary components of
the Bank's loan portfolio. The terms of such loans vary by their purpose and
underlying collateral (if any). Equipment loans and leases will typically be
made for a term of five years or less at fixed or variable rates, with the loan
or lease fully amortized over the term and secured by the financed equipment and
with a loan-to-value ratio of 80% or less and a lease-to-value ratio of 92% or
less. Loans to support working capital will typically have terms not exceeding
one year and will usually be secured by accounts receivable, inventory or
personal guarantees of the principals of the business. For loans secured by
accounts receivable or inventory, principal will typically be repaid as the
assets securing the loan are converted into cash, and in other cases, principal
will typically be due at maturity. The principal economic risk associated with
each category of anticipated loans, including commercial loans, is the
creditworthiness of the Bank's borrowers, which in turn is affected by general
economic conditions and the strength of the services and retail market segments.
In addition, the quality of the borrower's management and its ability to
properly evaluate changes in the supply and demand characteristics affecting its
respective markets for products and services and to effectively respond to such
changes are significant factors in the creditworthiness of a commercial
borrower. General economic factors affecting a borrower's ability to repay
include interest, inflation and employment rates, as well as other factors
affecting a borrower's customers, suppliers and employees. The well established
banks in the Bank's PSA will make proportionately more loans to medium-to-large
sized businesses than the Bank. Many of the Bank's anticipated commercial loans
will likely be made to small-to-medium-sized businesses who may be less able to
withstand competitive, economic and financial conditions than larger borrowers.
Other Banking Services. Other anticipated bank services include cash
management services, safe-deposit boxes, travelers checks, direct deposit of
payroll and social security checks, and automatic drafts for various accounts.
The Bank plans to become associated with a shared network of automated teller
machines that may be used by Bank customers throughout Georgia and other
regions. The Bank plans to offer annuities, mutual funds and other financial
services through a third party which has not, as yet, been chosen by the Bank.
The Bank also plans to offer MasterCard and VISA credit card services through a
correspondent bank as an agent for the Bank. The Bank does not plan to exercise
trust powers during its initial years of operation. The Bank may in the future
offer a full-service trust department, but cannot do so without the prior
approval of the OCC.
18
<PAGE> 22
The Bank will also offer to its targeted commercial customers a courier
service that will pick up non-cash deposits and minimal cash deposits of up to
$200 from the customer's place of business and deliver them to the Bank. The
Bank believes that this will be an important service for its customers because
the Bank will initially have only one location. The Bank will contract with a
third party courier service which has been approved by the Georgia Public
Service Commission for bank-related work.
Investments. In addition to loans, the Bank will make other investments
primarily in obligations of the United States or obligations guaranteed as to
principal and interest by the United States and other taxable securities. No
investment in any of those instruments will exceed any applicable limitation
imposed by law or regulation.
Deposits. The Bank will seek to establish solid core deposits, including
checking accounts, money market accounts, a variety of certificates of deposit
and IRA accounts. The primary means used to attract deposits will be an
aggressive marketing plan in the overall service area, a broad product line and
competitive services. The primary sources of deposits will be residents of, and
businesses and their employees located in, the Bank's PSA obtained through
personal solicitation by the Bank's officers and directors, direct mail
solicitations and advertisements published in the local media. Deposits will be
generated by offering a broad array of competitively priced deposit services,
including demand deposits, regular savings accounts, money market deposits
(transaction and investment), certificates of deposit, retirement accounts and
other deposit or funds transfer services which may be permitted by law or
regulation and which may be offered to remain competitive in the market.
Asset and Liability Management. The Bank intends to manage its assets and
liabilities to provide an optimum and stable net interest margin, a profitable
after-tax return on assets and return on equity and adequate liquidity. These
management functions will be conducted within the framework of written loan and
investment policies which the Bank will adopt. The Bank will attempt to maintain
a balanced position between rate sensitive assets and rate sensitive
liabilities. Specifically, it will chart assets and liabilities on a matrix by
maturity, effective duration and interest adjustment period and endeavor to
manage any gaps in maturity ranges.
Employees. Upon commencement of operations, the Bank is expected to have
approximately nine full-time employees and three part-time employees. The
Company is not expected to have any employees who are not also employees of the
Bank.
H.N. Padget, Jr. will be the President and Chief Executive Officer of the
Company and the Bank and Chief Lending Officer of the Bank. Mr. Padget has over
20 years of banking experience, including extensive administration and retail
banking experience. See "Management--Company Officers and Directors; Proposed
Bank Officers and Directors."
19
<PAGE> 23
MANAGEMENT
COMPANY OFFICERS AND DIRECTORS; PROPOSED BANK OFFICERS AND DIRECTORS
The following table sets forth, for the initial members of the Board of
Directors of both the Company and the Bank, (i) their names, addresses and ages
at May 22, 1998, (ii) the positions they will hold in the Company and the Bank,
(iii) the number of shares of Common Stock they beneficially own, and (iv) the
percentage of outstanding shares beneficially owned after the Offering.
<TABLE>
<CAPTION>
PERCENT OF
POSITIONS NUMBER OUTSTANDING
NAME AND ADDRESS (AGE) TO BE HELD OF SHARES SHARES
- ---------------- ----- ------------------ --------- -----------
<S> <C> <C> <C> <C>
Class I Directors:
Patricia R. Grimes............................ (49) Director 12,500 1.1%
4385 Old Wesleyan Woods
Alpharetta, Georgia 30022
Heber N. Padget, Sr........................... (66) Director 22,500 2.0
128 Mt. View Drive, NW
Gainesville, Georgia 30501
John A. Pond.................................. (50) Director 15,000 1.4
c/o Armour, Cape & Pond, Inc.
2635 Century Parkway
Suite 800
Atlanta, Georgia 30345
Reid W. Simmons............................... (50) Director 12,500 1.1
8660 River Trace
Roswell, Georgia 30076
W. David Sweatt............................... (50) Chairman of the 50,000 4.5
1580 Warsaw Rd. Board and Director
Roswell, Georgia 30076
Class II Directors:
David R. Hink................................. (49) Director 15,000 1.4
c/o Strategic Solutions Group, Inc.
165 Willow Brook Drive
Roswell, Georgia 30076
Mary E. Johnson............................... (45) Director 12,500 1.1
c/o T. Stephen Johnson & Assoc.
9755 Dogwood Road,
Suite 310
Roswell, Georgia 30075
Robert W. Johnston............................ (46) Director 10,000 .9
c/o Koala Enterprises
2880 Holcomb Bridge Road
Building 90B,
Suite 579
Alpharetta, Georgia 30202
H.N. Padget, Jr............................... (42) President, Chief 5,000 .5
c/o Chattahoochee National Bank Executive Officer,
(Information)
1303 Hightower Trail, Chief Lending
Suite 130 Officer(1) and
Atlanta, Georgia 30350 Director
</TABLE>
20
<PAGE> 24
<TABLE>
<CAPTION>
PERCENT OF
POSITIONS NUMBER OUTSTANDING
NAME AND ADDRESS (AGE) TO BE HELD OF SHARES SHARES
- ---------------- ----- ------------------ --------- -----------
<S> <C> <C> <C> <C>
Class III Directors:
Michael L. Aldredge........................... (45) Director 10,000 .9
c/o Aldredge Properties
6095 Lake Forrest Drive
Suite 200
Atlanta, Georgia 30329
C. Dan Alford................................. (37) Director 10,000 .9
c/o A&C Enercom, Inc.
1777 Northeast Expressway
Atlanta, Georgia 30094
William H. Groce, Jr.......................... (61) Secretary and 15,000 1.4
8250 Overview Court Director
Roswell, Georgia 30076
W. Darrell Sumner............................. (49) Director 10,000 .9
c/o Bank Assets, Inc.
9755 Dogwood Rd
Suite 310
Roswell, Georgia 30075
All Proposed Directors and Officers as a Group (13)........................ 200,000 18.2%
</TABLE>
- ---------------
(1) Bank only.
Each of the above persons has been a director of the Company since November
5, 1997 and is a proposed director of the Bank. The Company has a staggered
Board of Directors whereby one-third of the directors will be elected each year
at the Company's annual meeting of shareholders. Upon such election, each
director of the Company will serve for a term of three years. The terms of
Patricia R. Grimes, Heber N. Padget, Sr., John A. Pond, Reid W. Simmons and W.
David Sweatt, as Class I directors, expire in 1998, the terms of David R. Hink,
Mary E. Johnson, Robert W. Johnston and H.N. Padget, Jr., as Class II directors,
expire in 1999 and the terms of Michael L. Aldredge, C. Dan Alford, William H.
Groce, Jr., and W. Darrell Sumner, as Class III directors, expire in 2000. See
"Description of Capital Stock of the Company -- Certain Provisions of the
Articles of Incorporation and Bylaws." The Company's officers are appointed by
the Board of Directors and hold office at the will of the Company's Board.
Each of the Bank's proposed directors will, upon approval of the OCC, serve
until the Bank's first shareholders meeting, which meeting will be held shortly
after the Bank receives its charter. It is anticipated that each proposed
director will be nominated to serve as director of the Bank at that meeting.
After the first shareholders meeting, directors of the Bank will serve for a
term of one year and will be elected by the Company, as the sole shareholder of
the Bank, each year at the Bank's annual meeting of shareholders. The Bank's
officers will be appointed by its Board of Directors and will hold office at the
will of the Bank's Board.
Michael L. Aldredge. Mr. Aldredge has served as Operations Manager and
Secretary of Squire Inn, Inc. since 1990. From 1975 to 1990, he served as
General Manager of Squire Inns' three different hotels. Mr. Aldredge is also a
partner in KAL Jax Hotel, LTD, where he serves as Managing Partner of Days Inn
Jacksonville Beach Resort. Mr. Aldredge also serves in a partnership capacity
and as Secretary of AAA Cigarette Co., a vending machine company. He received a
BBA degree from the University of Georgia in 1975. Mr. Aldredge serves as an
Executive Board member of Sandy Springs Revitalization, Inc. He also served as
Transportation Committee member of the Sandy Springs Revitalization Plan that
was submitted to the Fulton County Board of Commissioners. Mr. Aldredge is a
Committee Chairman of the Copeland Road Owners Association, an organization
developed for the rejuvenation and upgrading of the area around Copeland Road
and Roswell Road, and works closely with the Fulton County Police "COPS"
Program.
21
<PAGE> 25
Mr. Aldredge has also served as Program Chairman and twice as the Vice Chairman
for the Cobb GM Forum, a hotel general managers association. Mr. Aldredge served
on the Woodward North Steering Committee. He is a native of Atlanta and has
lived in the Bank's PSA for over 15 years. Mr. Aldredge is a member of the Loan
Committee of the Bank.
C. Dan Alford. Mr. Alford has served as the Executive Vice President and
Chief Operating Officer of A&C Enercom, Inc., a subsidiary of Intellisource,
Inc., a Safeguard Securities company since 1992. He has served on several boards
including A&C Enercom, Inc., Cape & Companies and Independent Funeral Home
Resources. Mr. Alford received his BS degree in Electrical Engineering from the
Georgia Institute of Technology. He is a native of Atlanta. Mr. Alford is a
member of the Audit Committee of the Company and the Audit, Compliance and
Community Reinvestment Act Committee of the Bank.
Patricia Rhodes Grimes. Ms. Grimes has been retired from SunTrust Service
Corporation since 1992. She has extensive banking experience and has held
various management level positions with SunTrust Service Corporation and Trusco
Data Systems, a division of Trust Company of Georgia. Most recently, Ms. Grimes
served as Senior Vice President and Manager of the Application Systems Division
with SunTrust Service Corporation, a subsidiary of SunTrust Banks, Inc. She also
held positions with Trusco Data Systems, including Group Vice President and
Assistant Manager of Systems and Programming, Vice President and Section Manager
of Deposits, Financial and Human Resources Systems, Systems Officer and Project
Leader of the Demand Deposit System, and programmer/analyst for Deposit
Applications. Ms. Grimes served on the MIS Advisory Board for the University of
Georgia. Ms. Grimes received a degree in Mathematics from the University of
Georgia. Ms. Grimes is a native of Atlanta, and she has lived in the Bank's PSA
for 17 years. Ms. Grimes is the Chairman of the Audit Committee of the Company
and the Audit, Compliance and Community Reinvestment Act Committee of the Bank.
William H. Groce, Jr. Mr. Groce is a retired executive from BellSouth
Telecommunications. Mr. Groce held various positions at BellSouth
Telecommunications throughout his career which began in 1958, including
Executive Assistant to the President of BellSouth Telecommunications and
Secretary to its Board of Directors from 1988 until his retirement in 1994. From
1986 to 1988, Mr. Groce served as Assistant Vice President, Regulatory Matters.
Mr. Groce received a BS degree in Business Administration from the University of
North Carolina, Chapel Hill. Mr. Groce served as a member of the board of the
Chamber of Commerce in Asheville, North Carolina. Mr. Groce has lived in the
Bank's PSA for 15 years. Mr. Groce is the Secretary of the Company, the Chairman
of the Compensation Committee of the Company and the Asset/Liability Management
Committee of the Bank.
David R. Hink. Mr. Hink has been the Managing Principal of Strategic
Solutions Resources since December 1996. From 1995 to 1996, Mr. Hink served as
President of the MarKit Division of Severn Trent Systems, a software company.
From 1993 to 1995, Mr. Hink was employed with A&C Enercom, Inc., where he served
as Senior Vice President and was responsible for their information technology
group of companies,
comprised of Entec Consulting and the Market Applications Group. From 1990 to
1993, Mr. Hink served as Senior Vice President and Chief Development Officer for
Cape & Companies. Mr. Hink received a BS degree in Electrical Engineering, a BA
degree in Business Administration and an MBA degree in Management and Finance
from the University of Wisconsin. He has lived in the Bank's PSA area for over 8
years. Mr. Hink is a member of the Compensation Committee of the Company and the
Loan Committee of the Bank.
Mary E. Johnson. Ms. Johnson has served as the Controller of T. Stephen
Johnson & Associates and its related entities since 1987. She also serves as the
Corporate Secretary to the Board of Directors of Net.B@nk, Inc., the parent
company of Atlanta Internet Bank. Ms. Johnson has been involved in various
organizations, including as a member of the Auxiliary of Egleston Children's
Hospital, as the Past President of Horseshoe Bend Twigs, a neighborhood fund
raising extension of Egleston Children's Hospital, and as a member of Beta Sigma
Phi, a community services organization. Ms. Johnson has lived in the Bank's PSA
for over 15 years. Ms. Johnson is a member of the Marketing Committee of the
Bank.
Robert W. Johnston. Mr. Johnston is a consultant to the staffing services
industry through his investment in Koala Enterprises, Inc. since 1978. From 1974
to 1978, he was a Retail Marketing Manager, Bank Card Division at First National
Bank of Atlanta (now Wachovia Bank). Mr. Johnston received a
22
<PAGE> 26
Bachelor's degree from Duke University. He served as President of the Georgia
Association of Temporary Services and the Johnson Estates Homeowners
Association. He serves as a member of the Board of Directors of the Horseshoe
Bend Homeowners Association. Mr. Johnston has lived in the Bank's PSA for 12
years. He is a member of the Marketing Committee of the Bank.
H.N. Padget, Jr. Mr. Padget is the proposed President and Chief Executive
Officer of the Bank. He has been a banker in metropolitan Atlanta for over 20
years and has served in various management positions throughout his career. Mr.
Padget most recently served as Executive Vice President of Milton National Bank,
Alpharetta, Georgia from 1993 through October of 1997. Mr. Padget served as
Group Vice President of Georgia Federal Bank from 1988 to 1993. Mr. Padget
served as Vice President of National Bank of Georgia from 1981 to 1988. Mr.
Padget began his banking career with Gainesville National Bank, Gainesville,
Georgia where he served as Assistant Vice President from 1979 to 1981. Mr.
Padget was an Assistant National Bank Examiner with the OCC from 1978 to 1979.
Mr. Padget received a B.S. in Financial Management at Clemson University. He
also attended the National Commercial Lending School and the National Commercial
Lending Graduate School in Norman, Oklahoma. Mr. Padget has lived in the Bank's
PSA for 20 years. Mr. Padget is the son of Heber N. Padget, Sr.
Heber N. Padget, Sr. Heber Padget has been retired from the farming
business he started in 1962 since 1991. He owns the Padget Cattle Company and
Wauka Chick Company, both farming-related businesses. Mr. Padget has lived in
Gainesville, Georgia for 40 years. He served for six years on the Gainesville
Planning Commission. Mr. Padget received a Bachelor of Science degree from
Clemson University. He served in the United States Army Reserves for 26 years
and retired as a Lieutenant Colonel. Mr. Padget is a member of the
Asset/Liability Management Committee of the Bank. Mr. Padget is the father of
H.N. Padget, Jr.
John A. Pond. Mr. Pond has been the President of Armour Cape & Pond, an
engineering and architectural services company, since 1987. He holds a
Professional Engineer license as well as a Professional Land Surveyor license.
Mr. Pond received a B.S. in Civil Engineering from the Virginia Military
Institute. In addition, he received an ME degree in Civil Engineering from the
University of Virginia, Charlottesville. Mr. Pond serves as a member of the
Advisory Council of the Georgia Tech Economic Development Institute. He serves
as a member of Senator Paul Coverdale's Small Business Task Force. He is a
former designee of Leadership Atlanta and has also directed the campaign for
engineering firms in metro Atlanta for the United Way. Further, Mr. Pond has
been active in the Atlanta Heart Fund, High Point Civic Association, Consulting
Engineers Council of Georgia, Society of Marketing Professional Services,
Society of Professional Engineers, Society of American Military Engineers and
Professional Services Management Association, Northside Methodist Church and the
VMI Alumni Association. He has lived in the Atlanta area for 20 years. Mr. Pond
is a member of the Marketing Committee of the Bank.
Reid W. Simmons. Mr. Simmons has been the President, founder and co-owner
of OMSystems, Inc. (Orthotrac), a leading provider of computer hardware and
software for orthodontists since 1981. From 1970 until 1981, he held various
sales and management positions with NCR Corporation including Regional Director
and National Director of Large Computer Systems. Mr. Simmons received a degree
in Industrial Management from the Georgia Institute of Technology. Mr. Simmons
is a member of Commissioner Bob Fulton's SPARC (Strategic Planning and Review
Committee) and has been elected to the Board of the Horseshoe Bend Community
Association for nine years -- the last seven years as its President. He has
served as President of the St. Jude's Home-School Association and has been
involved in fund raising activities for various charities. He has lived in the
Bank's PSA for over 32 years. Mr. Simmons is a member of the Audit Committee of
the Company and the Marketing Committee and the Audit, Compliance and Community
Reinvestment Act Committee of the Bank.
W. Darrell Sumner. Mr. Sumner has been the President and co-founder of
Bank Assets, Inc., a firm that specializes in marketing, designing and
implementing compensation and benefit programs for financial institutions since
1992. He has over 25 years of experience in the banking and financial services
industry. His previous experience includes serving as President of Capital South
Group, a commercial finance company, Senior Vice President of Southern/NCNB
National Bank and Vice President of Citizens & Southern National Bank.
Previously, he served as Chairman of the Matching Gifts Committee for the
Georgia Tech
23
<PAGE> 27
Alumni Roll Call and as United Way Chairman and Trustee for Citizens & Southern
National Bank. Mr. Sumner received a B.S. in Industrial Management from the
Georgia Institute of Technology. He is a 30 year resident of Atlanta. Mr. Sumner
is a member of the Compensation Committee of the Company and the Loan Committee
and Asset/Liability Management Committee of the Bank.
W. David Sweatt. Mr. Sweatt is the Chairman of the Bank. From 1996 through
1997, Mr. Sweatt managed personal investments. From 1993 until the company was
sold in 1996, Mr. Sweatt was an organizer, director and President and Chief
Executive Officer of Royal Bankshares of Acadiana, Inc., Lafayette, Louisiana, a
registered bank holding company which owned Bank of Lafayette and Trust Bank of
the U.S., a non-depository trust company. Mr. Sweatt simultaneously served as
President and Chief Executive Officer of both subsidiaries of the holding
company. From 1984 to 1992, he was President and Chief Executive Officer of
First National Bank of Lafayette, Lafayette, Louisiana. Mr. Sweatt has also
served as Senior Vice President of Corporate Development for First Commerce
Corporation in New Orleans, Vice President/Manager of the Commercial Loan
Department and of the International Department for First National Bank of South
Carolina, Columbia, South Carolina, and Executive Vice President/Chief
Administrative Officer, Director of Management Development and Training, and
International Officer for First Tennessee Bank, Inc., Memphis, Tennessee and its
subsidiaries in Knoxville and Memphis. Mr. Sweatt received a BA in Political
Science from Davidson College and an MA in Diplomacy and International Commerce
from the University of Kentucky, Lexington. He has been involved in various
activities throughout his career Sweatt received a BA in Political Science from
Davidson College and an MA in Diplomacy and International Commerce including:
Adjunct Professor, Graduate Business School at the University of South Carolina,
Member, Board of Trustees, University of Southwestern Louisiana Foundation,
Advisory Board, University of Southwestern Louisiana College of Business,
Chairperson, Citizens Committee on School Finance, Lafayette Parish School
Board, and Chairperson, Long-Range Planning Committee of the Downtown
Development Authority, Lafayette, Louisiana. Mr. Sweatt has lived in the Bank's
PSA for 1 1/2 years. He is the Chairman of the Loan Committee of the Bank.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company. The Compensation Committee establishes remuneration levels
for officers of the Company, reviews management organization and development,
reviews significant employee benefit programs and establishes and administers
executive compensation programs, including the Option Plans. The Compensation
Committee consists of William H. Groce, Jr., David R. Hink and W. Darrell
Sumner.
The Audit Committee recommends to the Board of Directors the independent
public accountants to be selected to audit the Company's annual financial
statements and approves any special assignments given to such accountants. The
Audit Committee also reviews the planned scope of the annual audit, any changes
in accounting principles and the effectiveness and efficiency of the Company's
internal accounting staff. The Audit Committee consists of C. Dan Alford,
Patricia Rhodes Grimes and Reid W. Simmons.
The Bank. The Loan Committee reviews any loan request made by a potential
borrower over a certain credit threshold for compliance with the Bank's lending
policies and federal and state rules and regulations governing extensions of
credit to such parties and makes a decision whether to extend credit to such
potential borrower. The Loan Committee consists of Michael L. Aldredge, David R.
Hink, W. Darrell Sumner and W. David Sweatt.
The Audit, Compliance and Community Reinvestment Act Committee provides
oversight to the Bank's internal audit function and compliance with regulatory
rules and regulations. The Audit, Compliance and Community Reinvestment Act
Committee consists of C. Dan Alford, Patricia Rhodes Grimes and Reid W. Simmons.
The Asset/Liability Management Committee provides guidance to the Bank in
balancing the yields and maturities in its loans and investments to its
deposits. The Asset/Liability Management Committee consists of William H. Groce,
Jr., Heber N. Padget, Sr. and W. Darrell Sumner.
24
<PAGE> 28
The Marketing Committee provides ideas and assistance to the Bank in
marketing its services within the Bank's PSA. The Marketing Committee consists
of Mary E. Johnson, Robert W. Johnston, John A. Pond and Reid W. Simmons.
The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.
EXECUTIVE COMPENSATION
The following table shows information for 1997 with regard to compensation
for services rendered in all capacities to the Company by the Chief Executive
Officer:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
------------------ ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
H.N. Padget, Jr............................... 1997 $20,833 -0- -0-
CEO
</TABLE>
EMPLOYMENT AGREEMENT
On November 1, 1997, the Company and the Bank entered into an employment
agreement with H. N. Padget, Jr. regarding Mr. Padget's employment as President
and Chief Executive Officer of the Company (the "Employment Agreement"). Under
the terms of the Employment Agreement, Mr. Padget will receive a salary of
$125,000 per year with a 2 1/2% increase per year on the anniversary date of the
opening of the Bank. The Employment Agreement provides that at the end of each
year of operation, Mr. Padget will be entitled to receive a cash bonus based on
a performance matrix established against budgets, which has not yet been
determined. The maximum cash bonus that may be paid in the initial
organizational stages of the Bank is $25,000. Additionally, the Employment
Agreement provides that the Company will grant Mr. Padget incentive stock
options to purchase up to 24,000 shares of Common Stock, vesting ratably over 5
years at 20% per year, for each year of continued employment, subject to
achieving certain performance targets. Additionally, Mr. Padget will be issued
6,000 incentive stock options upon the opening of the Bank. The options will be
granted at the market price of the Common Stock on the day of the grant.
Pursuant to the Employment Agreement, the Company has also provided an
automobile to be used by Mr. Padget. The period of employment commences as of
the date of receipt of the opening letter from the OCC and continues for a
period of 36 months thereafter except in the event of (i) Mr. Padget's death or
(ii) the inability to obtain a charter or opening letter from the OCC or the
FDIC. The employment may be terminated (i) at the election of the Bank and the
Company for cause; (ii) at Mr. Padget's election, upon the Bank and the
Company's breach of any material provision of the Employment Agreement; or (iii)
upon Mr. Padget's death or disability. In the event that Mr. Padget's employment
is terminated by the Company without cause, (a) the Company will be required to
meet its obligations under the Employment Agreement for a period of 12 months
from the date of termination with respect to Mr. Padget's compensation and
health and dental insurance coverage, and (b) Mr. Padget will be prohibited from
competing with the Bank or soliciting its customers or employees within the
geographic area set forth in the Employment Agreement for a period of 12 months
from the date of termination.
DIRECTOR COMPENSATION
The directors of the Company and the Bank, respectively, do not intend to
be separately compensated for their services as directors until the Company's
and the Bank's net profits exceed their net losses since inception on a
cumulative basis. The directors may in the future amend the Non Qualified Stock
Option Plan to cover non-employee directors in light of their past services to
the Company and the Bank for which the directors received no compensation and to
provide incentive compensation for future services.
25
<PAGE> 29
INCENTIVE STOCK OPTION PLAN
General. The Company's Board of Directors and initial shareholders have
adopted the Incentive Stock Option Plan to promote equity ownership of the
Company by key senior officers, key officers and other key employees of the
Company and the Bank, to increase their proprietary interest in the success of
the Company and to encourage them to remain in the employ of the Company.
Administration. The Incentive Stock Option Plan will be administered by
the Company's Compensation Committee, which is comprised of at least two
non-employee directors appointed by the Company's Board of Directors, or the
Board of Directors in the event that there is not a Compensation Committee
established at any time during the term of any option granted under the
Incentive Stock Option Plan. The Compensation Committee or the Board of
Directors, as the case may be, will have the authority to select the key senior
officers, key officers and other key employees of the Company and the Bank to
whom awards may be granted, to determine the terms of each award, to interpret
the provisions of the Incentive Stock Option Plan and to make all other
determinations that it may deem necessary or advisable for the administration of
the Incentive Stock Option Plan.
The Incentive Stock Option Plan provides for the grant of "incentive stock
options," as defined under Section 422(b) of the Internal Revenue Code of 1986,
as amended. The Board of Directors has reserved 60,000 shares of Common Stock
for issuance under the Incentive Stock Option Plan. In general, if any award
granted under the Incentive Stock Option Plan expires, terminates, is forfeited
or is canceled for any reason, the shares of Common Stock allocable to such
award may again be made subject to an award granted under the Incentive Stock
Option Plan.
Awards. Key senior officers, key officers and other key employees of the
Company and the Bank are eligible to receive grants under the Incentive Stock
Option Plan. Awards may be granted subject to a vesting requirement and may
become fully vested upon a merger or change of control of the Company or may
apply with appropriate adjustments as determined by the Compensation Committee
to the securities of the resulting corporation. The exercise price of incentive
stock options must at least equal the fair market value of the Common Stock
subject to the option (determined as provided in the Incentive Stock Option
Plan) on the date the option is granted.
An incentive stock option granted under the Incentive Stock Option Plan to
an employee owning more than 10% of the total combined voting power or value of
all classes of capital stock of the Company or of any parent or subsidiary
corporation of the Company is subject to the further restriction that such
option must have an exercise price of at least 110% of the fair market value of
the shares of Common Stock, issuable upon exercise of the option (determined as
of the date the option is granted) and may not have an exercise term of more
than five years from the date the option is granted. Incentive stock options are
also subject to the further restriction that the aggregate fair market value
(determined as of the date of grant) of Common Stock as to which any such
incentive stock option first becomes exercisable in any calendar year is limited
to $100,000 per recipient. To the extent options covering more than $100,000
worth of Common Stock first become exercisable in any one calendar year, the
excess will be nonstatutory options. For purposes of determining which, if any,
options have been granted in excess of the $100,000 limit, options will be
considered to become exercisable in the order granted.
Each key senior officer, key officer and key employee eligible to
participate in the Incentive Stock Option Plan will be notified by the
Compensation Committee. To receive an award under the Incentive Stock Option
Plan, an award agreement must be executed which specifies the type of award to
be granted, the number of shares of Common Stock to which the award relates, the
terms and conditions of the award and the date granted. In the case of an award
of options, the award agreement will also specify the price at which the shares
of Common Stock subject to the option may be purchased and the date(s) on which
the option becomes exercisable.
The full exercise price for all shares of Common Stock purchased upon the
exercise of options granted under the Incentive Stock Option Plan must be paid
by cash or by personal check. Incentive stock options granted to employees under
the Incentive Stock Option Plan may remain outstanding and exercisable for
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10 years from the date of grant or until the expiration of 90 days (or such
lesser period as the Compensation Committee may determine) from the date on
which the person to whom they were granted ceases to be employed by the Company.
The Board of Directors, upon recommendation of the Compensation Committee, shall
determine whether options granted under the Incentive Stock Option Plan are
exercisable at any time during the term or in cumulative or non-cumulative
installments during the term.
Amendment and Termination. The Incentive Stock Option Plan expires ten
years after its adoption, unless sooner terminated by the Board of Directors.
The Board of Directors has authority to amend the Incentive Stock Option Plan in
such manner as it deems advisable. The Incentive Stock Option Plan provides for
appropriate adjustment, as determined by the Compensation Committee, in the
number and kind of shares subject to unexercised options in the event of any
change in the outstanding shares of Common Stock by reason of a stock split,
stock dividend, combination or reclassification of shares, recapitalization,
merger or similar event.
Individual Grants. The Compensation Committee has approved awards of 6,000
incentive stock options and 3,000 incentive stock options to H. N. Padget, Jr.
and W. David Sweatt, respectively, that are exercisable only if and when the
Bank is successfully opened. Additionally, the Compensation Committee has
approved additional awards of 24,000 incentive stock options and 12,000
incentive stock options to Mr. Padget and Mr. Sweatt, respectively, subject to
achieving certain performance targets established by the Board of Directors.
Such options have been granted at an exercise price of $10.00 per share. After
giving effect to the awards, an additional 15,000 shares of Common Stock are
reserved for issuance upon the exercise of stock options yet to be granted under
the Incentive Stock Option Plan.
NON QUALIFIED STOCK OPTION PLAN
General. The Company's Board of Directors and initial shareholders have
adopted the Non Qualified Stock Option Plan to attract, retain and compensate
key personnel of the Company and the Bank through the grant of options.
Administration. The Non Qualified Stock Option Plan will be administered
by the Board of Directors of the Company. The Board of Directors will have the
authority to select the key employees of the Company and the Bank to whom awards
may be granted, to determine the terms of each award, to interpret the
provisions of the Non Qualified Stock Option Plan and to make all other
determinations that it may deem necessary or advisable for the administration of
the Non Qualified Stock Option Plan.
The Non Qualified Stock Option Plan provides for the grant of options to
purchase shares of Common Stock. The Board of Directors has reserved 40,000
shares of Common Stock for issuance under the Non Qualified Stock Option Plan.
In general, if any award granted under the Non Qualified Stock Option Plan
expires, terminates, is forfeited or is canceled for any reason, the shares of
Common Stock allocable to such award may again be made subject to an award
granted under the Non Qualified Stock Option Plan.
Awards. Key employees of the Company are eligible to receive grants under
the Non Qualified Stock Option Plan. Awards may be granted subject to a vesting
requirement. The exercise price of the stock options will be equal to the fair
market value of the underlying Common Stock on the date of the grant.
Each key employee eligible to participate in the Non Qualified Stock Option
Plan will be notified by the Board of Directors. To receive an award under the
Non Qualified Stock Option Plan, an award agreement must be executed which
specifies the type of award to be granted, the number of shares of Common Stock
to which the award relates, the terms and conditions of the award, the date
granted, the price at which the shares of Common Stock subject to the option may
be purchased and the date(s) on which the option becomes exercisable. The Board
may, in its discretion, include in any option granted a condition that the key
employee agrees to remain in the employ of and render services to the Company or
the Bank for a period of time specified in the agreement.
The full exercise price for all shares of Common Stock purchased upon the
exercise of options granted under the Non Qualified Stock Option Plan must be
paid in cash at the time of exercise. Options granted to employees under the Non
Qualified Stock Option Plan may remain outstanding and exercisable for ten years
from the date of grant or such lesser period as the Board of Directors may
determine. The Board may provide
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in any stock option agreement that if a participant ceases to be employed by the
Company or the Bank, his unexercised options shall immediately terminate and
will be of no further force or effect. No such options are issued and
outstanding as of the date of the Offering.
Amendment and Termination. The Non Qualified Stock Option Plan expires ten
years after its adoption, unless sooner terminated by the Board of Directors.
The Board of Directors has authority to amend the Non Qualified Stock Option
Plan in such manner as it deems advisable. The Non Qualified Stock Option Plan
provides for appropriate adjustment, as determined by the Board of Directors, in
the number and kind of shares subject to unexercised options, in the event of
any change in the outstanding shares of Common Stock by reason of a stock split,
stock dividend, combination or reclassification of shares, recapitalization,
merger or similar event.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
It is possible that the Company and the Bank will have banking and other
business transactions in the ordinary course of business with directors and
officers of the Company and the Bank, including members of their families or
corporations, partnerships or other organizations in which such directors and
officers have a controlling interest. Federal law regulates both the terms and
amounts of such loans. If such transactions occur, (i) they will be on
substantially the same terms (including price or interest rate and collateral)
as those prevailing at the time for comparable transactions with unrelated
parties, and any banking transactions will not be expected to involve more than
the normal risk of collectibility or present other unfavorable features to the
Company and the Bank, and (ii) they will be on terms no less favorable than
could be obtained from an unaffiliated third party and will be approved by a
majority of the directors, including a majority of the disinterested directors.
T. Stephen Johnson & Associates ("TSJ&A") provides consulting services in
connection with the formation of the Bank, including formulating the initial
business plan and feasibility analysis and orchestrating the regulatory process
to seek approval of the Bank's charter and federal deposit insurance. TSJ&A will
be compensated with a total consulting fee of $40,000, plus out-of-pocket
expenses. Mary E. Johnson is married to T. Stephen Johnson, President and sole
shareholder of TSJ&A. Ms. Johnson serves as the Controller of TSJ&A. W. Darrell
Sumner is the President and co-founder of Bank Assets, Inc., which is
principally owned by Mr. Johnson.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
COMMON STOCK
The Company's Articles of Incorporation authorize the Company to issue up
to 10,000,000 shares of Common Stock, par value $1.00 per share, of which
900,000 shares will be issued pursuant to the Offering. As of May 22, 1998,
200,000 shares of Common Stock were issued and outstanding and held by 17
shareholders of record. As of May 22, 1998, 60,000 shares of Common Stock were
reserved for issuance upon the exercise of outstanding stock options under the
Incentive Stock Option Plan and 40,000 shares of Common Stock were reserved for
issuance upon the exercise of outstanding stock options under the Non Qualified
Stock Option Plan.
All shares of Common Stock will be entitled to share equally in dividends
from funds legally available therefor, when, as and if declared by the Board of
Directors, and upon liquidation or dissolution of the Company, whether voluntary
or involuntary, to share equally in all assets of the Company available for
distribution to the shareholders. It is not anticipated that the Company will
pay any cash dividends on the Common Stock in the near future. See "Dividends."
Each holder of Common Stock will be entitled to one vote for each share on all
matters submitted to the shareholders. Holders of Common Stock will not have any
preemptive right to acquire authorized but unissued capital stock of the
Company. There is no cumulative voting, redemption right, sinking fund provision
or right of conversion in existence with respect to the Common Stock. All shares
of the Common Stock issued in accordance with the terms of the Offering as
described in this Prospectus will be fully-paid and non-assessable.
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PREFERRED STOCK
The Company's Articles of Incorporation also authorize the Board of
Directors to issue up to 10,000,000 shares of preferred stock, no par value (the
"Preferred Stock"). The Board of Directors has the authority to determine the
designation, powers, preferences and relative rights of the Preferred Stock.
Preferred Stock may have voting rights, subject to applicable law and
determination by the Board of Directors. As of the date of the Offering, no
Preferred Stock has been issued. Although the Company has no present plans to
issue any Preferred Stock, the ownership and control of the Company by the
holders of the Common Stock would be diluted if the Company were to issue
Preferred Stock that had voting rights. The Company will not issue Preferred
Stock to the Organizers except on the same terms as it is offered to all other
existing shareholders or to new shareholders.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
Shareholders' rights and related matters are governed by the Georgia
Business Corporation Code (the "GBCC") and the Company's Articles of
Incorporation and Bylaws. The Company's Articles of Incorporation and Bylaws
contain several provisions, which are summarized below, that may have an
"anti-takeover" effect in that they could prevent an acquisition of the Company
unless a potential acquiror has obtained the prior approval of the Board of
Directors of the Company. The anti-takeover provisions may make it more
difficult for a potential acquiror to obtain control of the Company by means of
replacing the existing members of the Board of Directors and management of the
Company. These provisions may also make it more difficult for the Company's
shareholders to replace the Board of Directors or management, which may tend to
perpetuate the incumbent Board and management.
Preferred Stock. The existence of Preferred Stock may impede the takeover
of the Company without the approval of the Company's Board of Directors by
enabling the Company's Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to gain control of the Company through a proxy contest, tender offer, merger or
otherwise. In addition, the issuance of shares of Preferred Stock with voting
rights may have an adverse effect on the rights of the holders of Common Stock,
and in certain circumstances, such issuances of Preferred Stock could decrease
the market price of the Common Stock.
Staggered Terms for Board of Directors. Article IX of the Articles of
Incorporation provides that the Board of Directors of the Company will be
divided into three classes and that the directors in each class will serve for
staggered terms of three years each. This means that unless the existing
directors were to resign (which may be the result in a friendly acquisition of
the Company), it would take at least two annual meetings of the Company's
shareholders to replace a majority of its directors.
Under the GBCC, directors are elected annually for a term of one year
unless the articles of incorporation provide otherwise.
Change in Number of Directors. Section 12.1 of the Bylaws of the Company
provides that any bylaw may be amended or repealed, including bylaws relating to
the number of directors of the Company, and new bylaws adopted by the Board of
Directors or by the affirmative vote of the holders of at least 2/3 of the
issued and outstanding shares of Common Stock.
Under the GBCC, the number of directors may be increased or decreased from
time to time by amendment to the Bylaws, unless the articles of incorporation
provide otherwise or unless the number of directors is otherwise fixed by the
shareholders.
Removal of Directors. Article X of the Articles of Incorporation of the
Company provides that one or more directors of the Company may be removed for
cause during their terms by the affirmative vote of the holders of a majority of
the issued and outstanding shares of each class of capital stock of the Company
then entitled to vote on such matters, as a class, and of the total shares
entitled to vote thereon. Article X also provides that directors of the Company
may be removed during their terms without cause by the affirmative vote of the
holders of 2/3 of the issued and outstanding shares of each class of capital
stock of the Company then entitled to vote on such matters, as a class, and of
the total shares entitled to vote thereon.
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Under the GBCC, one or more directors of a corporation may be removed with
or without cause by the affirmative vote of a majority of the shares present at
a meeting at which a quorum is represented and entitled to vote thereon, unless
the articles of incorporation or a bylaw adopted by the shareholders provides
otherwise.
Special Shareholders' Meetings. Section 2.3 of the Bylaws of the Company
allows the President, the Board of Directors or shareholders holding not less
than 2/3 of the outstanding shares of the Company entitled to vote in an
election of directors to call a special meeting of the shareholders.
Under the GBCC, special meetings of shareholders may be called by the Board
of Directors, persons authorized to call such meetings by the articles of
incorporation or bylaws of the corporation or the holders of at least 25%, or
such greater or lesser percentage as may be provided in the articles of
incorporation or bylaws, of all the votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting.
Supermajority Voting on Certain Transactions. Under Article VIII of the
Articles of Incorporation of the Company, any disposition of all or
substantially all of its assets will require the affirmative vote of the holders
of at least 2/3 of the issued and outstanding shares of each class of capital
stock of the Company then entitled to vote on such matters, as a class, and of
the total shares entitled to vote thereon. However, if the Board of Directors of
the Company has approved the particular transaction by the affirmative vote of a
majority of the entire Board, then shareholder approval of the transaction would
require the affirmative vote of the holders of only a majority of the
outstanding shares of each class of capital stock of the Company then entitled
to vote on such matters, as a class, and of the total shares entitled to vote
thereon.
The foregoing provision could enable a minority of the Company shareholders
to prevent a transaction favored by the majority of the shareholders. Also, in
some circumstances, the directors could cause a 2/3 vote to be required to
approve the transaction by withholding their consent to such a transaction,
thereby entrenching their positions with the Company and the Bank. However, of
the thirteen persons who are directors of the Company, only one will be
affiliated with the Company and the Bank in a full-time management position.
Constituency Considerations. As permitted by O.C.G.A. sec. 14-2-202(b),
the Company's Articles of Incorporation permit the Board of Directors, in
evaluating an acquisition proposal, to consider the effects of the reputation
and business practices of the offeror and its management and affiliates upon the
Company and its subsidiaries and its employees, depositors and customers, as
well as the communities which they serve, and the future value of the Common
Stock in connection with determining the best interests of the Company and its
shareholders. The Articles of Incorporation also allow the Board of Directors,
when evaluating an acquisition proposal, to consider matters such as offering
price, the value of the securities offered in any exchange and any other matters
deemed pertinent by the Board of Directors when considering whether to oppose
such an offer.
Fair Price and Business Combination Statutes. Article IX of the Company's
Bylaws provides that the provisions of the GBCC's Fair Price Statute (O.C.G.A.
sec.sec. 14-2-1110 to 14-2-1113) and Business Combination Statute (O.C.G.A.
sec.sec. 14-2-1131 to 14-2-1133), both of which provide certain anti-takeover
protections, shall apply to the Company. The Fair Price provisions are designed
to protect shareholders against the inequities of certain tactics which have
been utilized in hostile takeover attempts. The Business Combination Statute
prohibits any person who acquires 10% or more of the voting stock of the Company
from thereafter engaging in any business combination with the Company for a
period of 5 years unless such person obtains approval from the Company's Board
of Directors or 90% of the remaining shareholders or acquires all the remaining
shares in the same transaction.
Amendment of Certain Provisions. Any amendment of Articles IX, X, XI, XIV,
XVII and XX of the Company's Articles of Incorporation requires the affirmative
vote of the holders of at least 2/3 of the outstanding shares of Common Stock,
unless 2/3 of the entire Board of Directors approve the amendment. If 2/3 of the
Board approve the amendment, the approval of only a majority of the outstanding
shares of capital stock entitled to be cast at the meeting called for that
purpose, voting together as a single class, shall be required to approve such
action.
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INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTORS
Indemnification. Article XIII of the Bylaws of the Company contains
certain indemnification provisions which provide that directors, officers,
employees or agents of the Company will be indemnified against expenses actually
and reasonably incurred by them if they are successful on the merits of a claim
or proceeding.
When a case or dispute is not ultimately determined on its merits (i.e., it
is settled), the indemnification provisions provide that the Company will
indemnify directors when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the director conducted himself in good
faith and acted in a manner he reasonably believed to be in or not opposed to
the best interests of the Company and, with respect to any criminal action or
proceeding, if the director had no reasonable cause to believe his conduct was
unlawful. Whether the applicable standard of conduct has been met is determined
by the Board of Directors, the shareholders or independent legal counsel in each
specific case. The Company may not, however, indemnify a director for liability
arising out of circumstances which constitute exceptions to limitation of a
director's liability for monetary damages. See "-- Limitation of Liability"
below.
The indemnification provisions of the Bylaws specifically provide that the
Company may purchase and maintain insurance on behalf of any director, officer,
employee or agent against any liability asserted against such person and
incurred by him in any such capacity, whether or not the Company would have had
the power to indemnify against such liability.
The Company is not aware of any pending or threatened action, suit or
proceeding involving any of its directors or officers for which indemnification
from the Company may be sought. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Limitation of Liability. Article XVII of the Company's Articles of
Incorporation, subject to certain exceptions, eliminates the potential personal
liability of a director for monetary damages to the Company and to the
shareholders of the Company for breach of a duty as a director. There is no
elimination of liability for a breach of duty involving (i) appropriation of a
business opportunity of the Company, (ii) an act or omission involving
intentional misconduct or a knowing violation of law, (iii) a transaction from
which the director derives an improper material tangible personal benefit or
(iv) any payment of a dividend or approval of a stock repurchase that is illegal
under the GBCC. Article XVII does not eliminate or limit the right of the
Company or its shareholders to seek injunctive or other equitable relief not
involving monetary damages.
Article XVII was adopted by the Company pursuant to the GBCC which allows
Georgia corporations, with the approval of their shareholders, to include in
their articles of incorporation a provision eliminating or limiting the
liability of directors, except in the circumstances described above. Article
XVII was included in the Company's Articles of Incorporation to encourage
qualified individuals to serve and remain as directors of the Company. Article
XVII was also included to enhance the Company's ability to secure liability
insurance for its directors at a reasonable cost. The Company intends to obtain
liability insurance covering actions taken by its directors in their capacities
as directors. The Board of Directors believes that Article XVII will enable the
Company to secure such insurance on terms more favorable than if such a
provision were not included in the Articles of Incorporation.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 1,100,000 shares of
Common Stock outstanding. The 900,000 shares sold in the Offering (1,035,000
shares if the Underwriter's over-allotment option is exercised in full) will be
freely tradable by persons other than affiliates of the Company, without
restriction. Of this amount, shares which will be beneficially owned by persons
who are affiliates of the Company will be, commencing 90 days after the date of
this Prospectus, eligible for public sale pursuant to Rule 144, subject to the
volume restrictions discussed below. The remaining 200,000 shares of Common
Stock will be "restricted" securities within the meaning of Rule 144 under the
Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including
exemptions contained in Rule 144. The Company and all current shareholders of
the Company, however, have agreed not to sell or otherwise dispose of any shares
of Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of the Underwriter, except that the Company
may issue shares of Common Stock in connection with acquisitions or upon the
exercise of options granted under the Option Plans. See "Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his shares of Common
Stock for at least one year (including the prior holding period of any prior
owner other than an affiliate) is entitled to sell within any three-month period
that number of shares which does not exceed the greater of 1% of the outstanding
shares of Common Stock and the average weekly trading volume during the four
calendar weeks preceding each such sale. Sales under Rule 144 are also subject
to certain manner of sale provisions, notice requirements and the availability
of current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed an "affiliate" of the Company for at
least three months and who has beneficially owned shares for at least two years
(including the holding period of any prior owner other than an affiliate) would
be entitled to sell such shares under Rule 144 without regard to the limitations
described above. Rule 144 defines "affiliate" of a company as a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such company. Affiliates of a
company generally include its directors, officers and principal shareholders.
The Company intends to grant under the Option Plans options to purchase up
to an aggregate of 100,000 shares of Common Stock. The Company intends to
register the shares issuable upon exercise of options granted under the Option
Plans. Upon such registration, such shares will be eligible for resale in the
public market without restrictions by persons who are not affiliates of the
Company, and to the extent they are held by affiliates, pursuant to Rule 144
without observance of the holding period requirements.
Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices and the ability of the Company to raise equity capital in the future.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase, an aggregate of 900,000 shares of Common
Stock.
The Underwriting Agreement provides that the obligations of the Underwriter
thereunder are subject to approval of certain legal matters by its counsel and
to various other conditions. The Underwriter is obligated to purchase all of the
shares of the Common Stock offered hereby, excluding shares covered by the over-
allotment option granted to the Underwriter, if any such shares are purchased.
The Company has been advised that the Underwriter proposes to offer the
Common Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus. The public offering price may be changed by the
Underwriter after the initial public offering.
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The Company has granted to the Underwriter an option, exercisable within 30
days after the date of the initial public offering, to purchase up to an
additional 135,000 shares of Common Stock to cover over-allotments, at the same
price per share to be paid by the Underwriter for the other shares offered
hereby. The Underwriter may purchase such shares only to cover over-allotments,
if any, in connection with the Offering.
The Company and the Underwriter have agreed to indemnify, or to contribute
to payments made by, each other against certain civil liabilities, including
certain civil liabilities under the Securities Act.
Before the Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock was determined by
negotiation between the Company and the Underwriter. The factors considered in
determining the initial public offering price include the amount of start-up
capital needed, the history of and prospects for the business in which the
Company operates, proposed operations, projected revenues and earnings of the
Company and the trend of such earnings, the prospects for such earnings, the
general condition of the securities markets at the time of the Offering and the
demand for similar securities of reasonably comparable companies. There can be
no assurance, however, that the price at which the Common Stock will sell after
the Offering will not be lower than the price at which it is being sold by the
Underwriter. The Underwriter has applied for permission to issue quotations with
respect to the Common Stock on the OTC Bulletin Board, but there can be no
assurance that a public market for the Common Stock will develop after the
Offering. See "Risk Factors -- No Public Market; Offering Price Arbitrarily
Determined."
The Underwriter has informed the Company that it does not intend to make
sales to any accounts over which it exercises discretionary authority.
The Company and the Organizers have agreed not to sell, contract to sell or
otherwise dispose of any shares of the Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of the
Underwriter. See "Shares Eligible for Future Sale."
In connection with the Offering, the Underwriter may purchase and sell the
Common Stock in the open market, which transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriter in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock, and syndicate
short positions involve the sale by the Underwriter of a greater number of
shares of Common Stock than they are required to purchase from the Company in
the Offering. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market, and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the OTC BB or
otherwise.
At the request of the Company, shares of Common Stock have been reserved
for sale in the Offering to certain individuals, including directors and
employees of the Company, members of their families and other persons having
business relationships with the Company. The price of such shares to such
persons will be the initial public offering price set forth on the cover of this
Prospectus. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent any of such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriter to the general public on the same basis as the other shares of
Common Stock offered hereby.
SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking laws and
regulations which impose specific requirements or restrictions and provide for
general regulatory oversight with respect to virtually all aspects of
operations. These laws and regulations are generally intended to protect
depositors, not stockholders. To the extent that the following summary describes
statutory or regulatory provisions, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions. Any change in applicable
laws or regulations may have a material effect on the business and prospects of
the Company. Beginning with the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and following with the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), numerous
33
<PAGE> 37
additional regulatory requirements have been placed on the banking industry in
recent years, and additional changes have been proposed. The operations of the
Company and the Bank may be affected by legislative changes and the policies of
various regulatory authorities. The Company is unable to predict the nature or
the extent of the effect on its business and earnings that fiscal or monetary
policies, economic control or new federal or state legislation may have in the
future.
BANK HOLDING COMPANY REGULATION
The Company will be a bank holding company within the meaning of the BHCA
and the Georgia BHC Act and will be regulated under such acts by the Federal
Reserve and the Department of Banking, respectively.
Under the BHCA and the Georgia BHC Act, the Company is subject to periodic
examination by the Federal Reserve and the Department of Banking and is required
to file periodic reports of its operations and such additional information as
the Federal Reserve and the Department of Banking may require. The Company's and
the Bank's activities are limited to banking, managing or controlling banks,
furnishing services to or performing services for its subsidiaries, or engaging
in any other activity that the Federal Reserve determines to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto.
Investments, Control and Activities. With certain limited exceptions, the
BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before (i) acquiring substantially all the assets of any bank,
(ii) acquiring direct or indirect ownership or control of any voting shares of
any bank if after such acquisition it would own or control more than 5% of the
voting shares of such bank (unless it already owns or controls the majority of
such shares) or (iii) merging or consolidating with another bank holding
company. Acquisition of any additional banks would also require prior approval
from the Department of Banking.
In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal Reserve
approval (or, depending on the circumstances, no notice of disapproval) prior to
any person or company acquiring "control" of a bank holding company, such as the
Company. Control is conclusively presumed to exist if an individual or company
acquires 25% or more of any class of voting securities of the bank holding
company.
Under the BHCA, the Company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting shares of any
company engaged in nonbanking activities, unless the Federal Reserve, by order
or regulation, has found those activities to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. Some of the
activities that the Federal Reserve has determined by regulation to be proper
incidents to the business of banking include making or servicing loans and
certain types of leases, engaging in certain insurance and discount brokerage
activities, performing certain data processing services, acting in certain
circumstances as a fiduciary or investment or financial advisor, owning savings
associations, and making investments in certain corporations or projects
designed primarily to promote community welfare.
Source of Strength; Cross-Guarantee. In accordance with Federal Reserve
policy, the Company is expected to act as a source of financial strength to the
Bank and to commit resources to support the Bank in circumstances in which the
Company might not otherwise do so. Under the BHCA, the Federal Reserve may
require a bank holding company to suspend the payment of dividends, terminate
any activity, or relinquish control of a nonbank subsidiary (other than a
nonbank subsidiary of a bank) upon the Federal Reserve's determination that
there exists a serious risk to the financial soundness or stability of any
subsidiary depository institution of the bank holding company. Further, federal
bank regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition. The Bank may be required to indemnify, or cross-guarantee, the FDIC
against losses it incurs with respect to any other bank controlled by the
Company, which in effect makes the Company's assets available to the FDIC to
assist any failing or failed bank subsidiary of the Company.
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<PAGE> 38
The Georgia Code. All Georgia bank holding companies must register with
the Department of Banking under the Financial Institutions Code of Georgia (the
"Georgia Code"). A registered bank holding company must provide the Department
of Banking with information with respect to the financial condition, operations,
management and inter-company relationships of the holding company and its
subsidiaries. The Department of Banking may also require such other information
as is necessary to keep itself informed about whether the provisions of Georgia
law and the regulations and orders issued thereunder by the Department of
Banking have been complied with, and the Department of Banking may make
examinations of any bank holding company and its subsidiaries.
Glass-Steagall Act. The Company will also be restricted in its activities
by the provisions of the federal Glass-Steagall Act, which will generally limit
the ability of the Company to own subsidiaries that are engaged principally in
the issue, flotation, underwriting, public sale, or distribution of securities.
The interpretation, scope and application of the provisions of the
Glass-Steagall Act currently are being considered and reviewed by regulators and
legislators and may be subject to significant revision as a result.
THE BANK
General. The Company will initially have one subsidiary bank. The Bank
will be a national banking association and member of the Federal Reserve System.
The OCC is the primary regulator for the Bank. The OCC regulates or monitors all
areas of the Bank's operations, including security devices and procedures,
adequacy of capitalization and loss reserves, loans, investments, borrowings,
deposits, mergers, issuances of securities, payment of dividends, interest rates
payable on deposits, interest rates or fees chargeable on loans, establishment
of branches, corporate reorganizations, maintenance of books and records and
adequacy of staff training to carry on safe lending and deposit gathering
practices. The Bank must maintain certain capital ratios and is subject to
limitations on aggregate investments in real estate, bank premises, and
furniture and fixtures.
Under FDICIA, all insured institutions must undergo regular on-site
examination by their appropriate banking agency. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other appropriate agencies a method
for insured depository institutions to provide supplemental disclosure of the
estimated fair market value of assets and liabilities, to the extent feasible
and practicable, in any balance sheet, financial statement, report of condition
or any other report of any insured depository institution. FDICIA also requires
the federal banking regulatory agencies to prescribe, by regulation, standards
for all insured depository institutions and depository institution holding
companies relating, among other things, to: (i) internal controls, information
systems and audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; and (v) asset quality.
Transactions with Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on the
amount of loans or extensions of credit to, or investments in, or certain other
transactions with, affiliates and on the amount of advances to third parties
collateralized by the securities or obligations of affiliates. In addition, most
of these loans and certain other transactions must be secured in prescribed
amounts. The Bank is also subject to the provisions of Section 23B of the
Federal Reserve Act that, among other things, prohibit an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with non-affiliated companies. The Bank is subject to certain
restrictions on extensions of credit to executive officers, directors, certain
principal stockholders and their related interests. Such extensions of credit
(i) must be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features.
Branching and Geographic Expansion. Georgia law presently permits the
establishment of branches by a state or national bank located in Georgia with
certain limitations. Banks in the State of Georgia may
35
<PAGE> 39
establish branches in any three additional counties. After July 1, 1998, banks
may establish branches in any county in Georgia. Under the Georgia Code, it is
unlawful without the prior approval of the Department of Banking (i) for any
bank holding company to acquire direct or indirect ownership or control of more
than 5% of the voting shares of any bank, (ii) for any bank holding company or
subsidiary thereof, other than a bank, to acquire all or substantially all of
the assets of a bank, or (iii) for any bank holding company to merge or
consolidate with any other bank holding company. It is also unlawful for any
bank holding company to acquire direct or indirect ownership or control of more
than 5% of the voting shares of any bank unless such bank has been in existence
and continuously operating or incorporated as a bank for a period of five years
or more prior to the date of application to the Department of Banking for
approval of such acquisition. In addition, in any such acquisition by an
existing bank holding company, the initial banking subsidiary of such bank
holding company must have been incorporated for not less than two years before
the holding company can acquire another bank.
The BHCA, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branch Efficiency Act of 1994 (the
"Interstate Banking Act"), which became effective on September 29, 1995,
repealed the prior statutory restrictions on interstate acquisitions of banks by
bank holding companies, such that the Company and any other bank holding company
located in Georgia may now acquire a bank located in any other state, and any
bank holding company located outside Georgia may lawfully acquire any bank based
in another state, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements and other
restrictions. The Interstate Banking Act also generally provides that after June
1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether. In March 1996, the Georgia legislature adopted legislation
opting into interstate branching. As a result of these provisions, banking
organizations in other states, most significantly North Carolina, Florida and
Alabama, have entered the Georgia market through acquisitions of Georgia
institutions. Those acquisitions are subject to federal and Georgia approval as
described above. The Georgia legislation also provides that an out-of-state bank
may not enter the State of Georgia through a de novo branch, nor may it enter
through the acquisition of less than substantially all of the assets of an
existing bank.
Community Reinvestment Act. The Community Reinvestment Act requires that
each insured depository institution shall be evaluated by its primary federal
regulator with respect to its record in meeting the credit needs of its local
community, including low and moderate income neighborhoods, consistent with the
safe and sound operation of those institutions. These factors are also
considered in evaluating mergers, acquisitions and applications to open a branch
or facility.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act governing disclosures of credit terms to consumer
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable the public and public officials to
determine whether a financial institution is fulfilling its obligation to help
meet the housing needs of the community it serves, the Equal Credit Opportunity
Act prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act of 1978 governing the
use and provision of information to credit reporting agencies, the Fair Debt
Collection Act governing the manner in which consumer debts may be collected by
collection agencies and the rules and regulations of the various federal
agencies charged with the responsibility of implementing such federal laws. The
deposit operations of the Bank also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer
financial records and prescribes procedures for complying with administrative
subpoenas of financial records, and the Electronic Funds Transfer Act and
Regulation E issued by the Federal Reserve to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts and customers'
rights and liabilities arising from the use of automated teller machines and
other electronic banking services.
36
<PAGE> 40
ENFORCEMENT POLICIES AND ACTIONS
FIRREA and subsequent federal legislation significantly increased the
enforcement authorities of the FDIC and other federal depository institution
regulators, and authorizes the imposition of civil money penalties up to $1
million per day. Persons who are affiliated with depository institutions can be
removed from any office held in such institution and banned for life from
participating in the affairs of any such institution. The banking regulators
have not hesitated to use the new enforcement authorities provided under FIRREA.
Furthermore, regulators have broad power to issue cease and desist orders that
may, among other things, require affirmative action to correct any harm
resulting from a violation or practice, including restitution, reimbursement,
indemnifications or guarantees against loss. A financial institution may also be
ordered to restrict its growth, dispose of certain assets, rescind agreements or
contracts or take other actions as determined by the ordering agency to be
appropriate.
DEPOSIT INSURANCE
The deposits of the Bank are currently insured to a maximum of $100,000 per
depositor, subject to certain aggregation rules. The FDIC establishes rates for
the payment of premiums by federally insured banks and thrifts for deposit
insurance. Separate insurance funds (BIF, the Bank Insurance Fund, and SAIF, the
Savings Association Insurance Fund) are maintained for commercial banks and
thrifts, with insurance premiums from the industry used to offset losses from
insurance payouts when banks and thrifts fail. Due to the high rate of failures
in recent years, the FDIC has adopted a risk-based deposit insurance premium
system for all insured depository institutions, including the Bank, which
requires that a depository institution pay to BIF or SAIF from $.00 to $.27 per
$100 of insured deposits depending on its capital levels and risk profile, as
determined by its primary federal regulator on a semi-annual basis. The Bank
anticipates that it will pay premiums at the lower end of the range during its
initial periods of operation.
DIVIDENDS
The principal source of the Company's cash revenues comes from dividends
received from the Bank. The amount of dividends that may be paid by the Bank to
the Company depends on the Bank's earnings and capital position and is limited
by federal and state law, regulations, and policies. In addition, the Board of
Governors of the Federal Reserve Bank has stated that bank holding companies
should refrain from or limit dividend increases or reduce or eliminate dividends
under circumstances in which the bank holding company fails to meet minimum
capital requirements or in which its earnings are impaired.
As a national bank, the Bank may not pay dividends from its
paid-in-capital. All dividends must be paid out of undivided profits then on
hand, after deducting expenses, including reserves for losses and bad debts. In
addition, a national bank is prohibited from declaring a dividend on its shares
of common stock until its surplus equals its stated capital, unless there has
been transferred to surplus no less than one-tenth of the bank's net profits of
the preceding two consecutive half-year periods (in the case of an annual
dividend). The approval of the OCC is required if the total of all dividends
declared by a national bank in any calendar year exceeds the total of its net
profits for that year combined with its retained net profits for the preceding
two years, less any required transfers to surplus.
Under FDICIA, the Bank may not pay a dividend if, after paying the
dividend, the Bank would be undercapitalized. See "-- Capital Regulations"
below.
CAPITAL REGULATIONS
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profile
among banks and bank holding companies, account for off-balance sheet exposure,
and minimize disincentives for holding liquid assets. The resulting capital
ratios represent qualifying capital as a percentage of total risk-weighted
assets and off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs
37
<PAGE> 41
should not allow expansion to diminish their capital ratios and should maintain
ratios well in excess of the minimums.
FDICIA established a capital-based regulatory plan designed to promote
early intervention for troubled banks and requires the FDIC to choose the least
expensive resolution of bank failures. The capital-based regulatory framework
contains five categories of compliance with regulatory capital requirements,
including "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." To qualify
as a "well capitalized" institution, a bank must have a leverage ratio of no
less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total
risk-based capital ratio of no less than 10%, and the bank must not be under any
order or directive from the appropriate regulatory agency to meet and maintain a
specific capital level.
The current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total capital ratio
equal to 8%, of which at least 4% must be Tier 1 capital. Under the FDICIA
regulations, the applicable agency can treat an institution as if it were in the
next lower category if the agency determines (after notice and an opportunity
for hearing) that the institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice. The degree of regulatory scrutiny of
a financial institution will increase, and the permissible activities of the
institution will decrease, as it moves downward through the capital categories.
Institutions that fall into one of the three undercapitalized categories may be
required to (i) submit a capital restoration plan; (ii) raise additional
capital; (iii) restrict their growth, deposit interest rates, and other
activities; (iv) improve their management; (v) eliminate management fees; or
(vi) divest themselves of all or a part of their operations. Bank holding
companies controlling financial institutions can be called upon to boost the
institutions' capital and to partially guarantee the institutions' performance
under their capital restoration plans. Tier 1 capital includes stockholders'
equity, qualifying perpetual preferred stock and minority interests in equity
accounts of consolidated subsidiaries, but excludes goodwill and most other
intangible assets and excludes the allowance for loan and lease losses. Tier 2
capital includes the excess of any preferred stock not included in Tier 1
capital, mandatory convertible securities, hybrid capital instruments,
subordinated debt and intermediate-term preferred stock and general reserves for
loan and lease losses up to 1.25% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50% or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are assigned to the 100%
risk category, except for first mortgage loans fully secured by residential
property and, under certain circumstances, residential construction loans, both
of which carry a 50% rating. Most investment securities are assigned to the 20%
category, except for municipal or state revenue bonds, which have a 50% rating,
and direct obligations of or obligations guaranteed by the United States
Treasury or United States Government agencies, which have a 0% rating.
The Federal Reserve has also implemented a leverage ratio, which is Tier 1
capital as a percentage of average total assets less intangible assets, to be
used as a supplement to the risk-based guidelines. The principal objective of
the leverage ratio is to place a constraint on the maximum degree to which a
bank holding company may leverage its equity capital base. The minimum required
leverage ratio for top-rated institutions is 3%, but most institutions are
required to maintain an additional cushion of at least 1-2%.
<TABLE>
<CAPTION>
TIER 1 RISK- TOTAL RISK-
CAPITAL CATEGORY TIER 1 CAPITAL BASED CAPITAL BASED CAPITAL OTHER
---------------- ---------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Well Capitalized............. 5% or more 6% or more 10% or more Not subject to a
capital
directive
Adequately Capitalized....... 4% or more 4% or more 8% or more --
Undercapitalized............. less than 4% less than 4% less than 8% --
Significantly less than 3% less than 3% less than 6% --
Undercapitalized...........
Critically 2% or less -- -- --
Undercapitalized........... tangible equity
</TABLE>
38
<PAGE> 42
These capital guidelines can affect the Bank and the Company in several
ways. While the Company will initially satisfy its leverage ratio requirements
and the Bank will be considered well capitalized, rapid growth, poor loan
portfolio performance, or poor earnings performance, or a combination of these
factors, could change the Bank's and the Company's capital position in a
relatively short period of time, making an additional capital infusion
necessary.
Federal banking regulators have also adopted final regulations which
mandate that regulators take into consideration (i) concentrations of credit
risk; (ii) interest rate risk (when the interest rate sensitivity of an
institution's assets does not match the sensitivity of its liabilities or its
off-balance-sheet position); and (iii) risks from non-traditional activities, as
well as an institution's ability to manage those risks, when determining the
adequacy of an institution's capital. That evaluation will be made as a part of
the institution's regular safety and soundness examination. In addition, the
banking regulators have amended their regulatory capital guidelines to
incorporate a measure for market risk. In accordance with the amended
guidelines, the Company and the Bank must incorporate a measure for market risk
in their regulatory capital calculations effective for reporting periods after
January 1, 1998. The revised guidelines are not expected to have a material
impact on the Company's or the Bank's regulatory capital ratios or their well
capitalized status.
RECENT AND FUTURE LEGISLATIVE DEVELOPMENTS
Revisions to the Bank Secrecy Act in 1996 affected numerous issues,
including suspicious activity reporting, funds transfer recording keeping,
interim exemption rules, and the definition of "exempt persons" and the way in
which banks designate exempt customers.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996 was
enacted in September 1996. This Act primarily provided arrangements for the
recapitalization of the SAIF and regulatory relief for bank holding companies in
several significant areas. Bank holding companies that also owned savings
associations and were, therefore, subject to regulation by the Office of Thrift
Supervision ("OTS") as savings and loan holding companies, were relieved of such
duplicative regulation, and neither future acquisitions of savings associations
by bank holding companies nor mergers of savings associations into banks will
any longer require application to and approval by the OTS. Acquisitions by well
capitalized and well managed bank holding companies of companies engaging in
permissible nonbanking activities (other than savings associations) may now be
made with only 12 days prior notice to the Federal Reserve, and de novo
engagement in such activities by such bank holding companies may be commenced
without prior notice and with only subsequent notice to the Federal Reserve. The
same legislation also gave regulatory relief to banks in regard to corporate
governance, branching, disclosure (under the Real Estate Settlement Procedures
Act and the Truth in Lending Act) and other operational areas.
The Federal Reserve also recently adopted regulations providing for a
streamlined application process in connection with acquisitions of banks and
bank holding companies by well capitalized, well managed bank holding companies.
During 1996, changes were also made to the current system used to rate banks.
On July 3, 1997, President Clinton signed legislation to clarify that
branches of state-chartered banks operating in host states are covered by the
law of their home chartering state. The Riegle-Neal Amendment Act of 1997 is
intended to preserve the dual banking system by having state banks come under
only the rules of their chartering states.
Other legislative and regulatory proposals regarding changes in banking and
the regulation of banks, thrifts and other financial institutions and bank and
bank holding company powers are being considered by the executive branch of the
Federal government, Congress and various state governments, including Georgia.
Among other items under consideration are the possible combination of the BIF
and SAIF, changes in or repeal of the Glass-Steagall Act which separates
commercial banking from investment banking, and changes in the BHCA to broaden
the powers of "financial services" companies to own and control depository
institutions and engage in activities not closely related to banking. Certain of
these proposals, if adopted, could significantly change the regulation of banks
and the financial services industry. It cannot be predicted whether any of these
proposals will be adopted, and, if adopted, how these proposals will affect the
Company and the Bank.
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<PAGE> 43
LEGAL PROCEEDINGS
The Company has received a letter from Milton National Bank ("Milton")
which threatens litigation in connection with H. N. Padget, Jr.'s resignation as
an officer of Milton and alleged misappropriation of Milton's trade secrets.
Based upon the advice of legal counsel, the Company believes such claims are
without merit and intends to vigorously defend itself in the event of
litigation. As of May 22, 1998, no legal proceedings had been filed by Milton.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Troutman Sanders LLP, Atlanta, Georgia. Waller Lansden
Dortch & Davis, PLLC, Nashville, Tennessee, is acting as counsel for the
Underwriter in connection with certain legal matters relating to the shares of
Common Stock offered hereby.
EXPERTS
The audited financial statements of the Company at December 31, 1997, and
for the period from November 5, 1997 (inception) until December 31, 1997, and
the reviewed financial statements of the Company as of April 30, 1998, set forth
herein have been so included in reliance on the report of Bricker & Melton,
P.A., independent certified public accountants, and upon the authority of that
firm as experts in accounting and auditing.
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the Commission. At any
time that the Company is not a reporting company, the Company will furnish its
shareholders with annual reports containing audited financial information for
each fiscal year on or before the date of the annual meeting of shareholders as
required by Rule 80-6-1-.05 of the Department of Banking. The Company's fiscal
year ends on December 31. Additionally, the Company will also furnish such other
reports as it may determine to be appropriate or as otherwise may be required by
law.
Upon the effective date of the Registration Statement on Form SB-2 (herein,
together with all amendments thereto, called the "Registration Statement") with
respect to the shares of Common Stock offered hereby, the Company will be
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, which include requirements to file annual reports on Form 10-KSB and
quarterly reports on Form 10-QSB with the Commission. This reporting obligation
will exist for at least one year and will continue for fiscal years thereafter,
except that such reporting obligations may be suspended for any subsequent
fiscal year if at the beginning of such year the Common Stock of the Company is
held of record by less than 300 persons.
ADDITIONAL INFORMATION
The Company has filed with the Commission the Registration Statement under
the Securities Act, with respect to the shares of Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Common Stock, reference is made to the Registration Statement and the
exhibits thereto. The Registration Statement may be examined and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional
offices of the Commission located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of the Registration Statement may be
obtained at prescribed rates from the Public Reference Section of the
Commission, Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549. The Commission also maintains
40
<PAGE> 44
a Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission.
The Company and the Organizers have filed or will file various applications
with the FDIC, the Federal Reserve, the Department of Banking and the OCC. Such
applications and the information they contain are not incorporated herein.
Prospective investors should rely only on information contained in this
Prospectus and in the Company's related Registration Statement in making an
investment decision. To the extent that other available information not
presented in this Prospectus, including information available from the Company
and information in public files and records maintained by the FDIC, the Federal
Reserve, the Department of Banking and the OCC, is inconsistent with information
presented in this Prospectus or provides additional information, such other
information is superseded by the information presented in this Prospectus and
should not be relied on. Projections appearing in the applications are based on
assumptions that the Organizers believe are reasonable, but as to which no
assurances can be made. The Company specifically disaffirms those projections
for purposes of this Prospectus and cautions prospective investors against
placing reliance on them for purposes of making an investment decision.
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<PAGE> 45
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheet -- December 31, 1997.......................... F-3
Statement of Operations for the Period from Inception
(November 5, 1997) to December 31, 1997................... F-4
Statement of Changes in Stockholders' Equity for the Period
from Inception (November 5, 1997) to December 31, 1997.... F-5
Statement of Cash Flows for the Period from Inception
(November 5, 1997) to December 31, 1997................... F-6
Notes to Financial Statements as of and for the period from
Inception (November 5, 1997) to December 31, 1997......... F-7
Accountants' Review Report.................................. F-9
Balance Sheet -- April 30, 1998............................. F-10
Statement of Operations for the four months ended April 30,
1998...................................................... F-11
Statement of Changes in Stockholders' Equity for the four
months ended April 30, 1998............................... F-12
Statement of Cash Flows for the four months ended April 30,
1998...................................................... F-13
Notes to Financial Statements as of and for the four months
ended April 30, 1998...................................... F-14
</TABLE>
F-1
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CNB Holdings, Inc.
(A Development Stage Corporation)
Atlanta, Georgia
We have audited the accompanying balance sheet of CNB Holdings, Inc. (a
development stage corporation), as of December 31, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for the
period from inception (November 5, 1997) to December 31, 1997. These financial
statements are the responsibility of CNB Holdings, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CNB Holdings, Inc. as of
December 31, 1997, and the results of its operations, changes in stockholders'
equity and cash flows for the period from inception (November 5, 1997) to
December 31, 1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that CNB
Holdings, Inc. will continue as a going concern. As discussed in Note 1 to the
financial statements, CNB Holdings, Inc. is in the organization stage and has
not commenced operations. Also, as discussed in Note 2, CNB Holdings, Inc.'s
future operations are dependent on obtaining capital through an initial stock
offering and obtaining the necessary final regulatory approvals to operate under
a national bank charter. These factors and the expense associated with the
development of a new banking institution raise substantial doubt about CNB
Holdings, Inc.'s ability to continue as a going concern. Management's plans in
regard to these matters are described in Note 2. The financial statements do not
include any adjustments relating to the recoverability of reported asset amounts
or the amount of liabilities that might result from the outcome of this
uncertainty.
/s/ BRICKER & MELTON, P.A.
--------------------------------------
BRICKER & MELTON, P.A.
February 27, 1998
Duluth, Georgia
F-2
<PAGE> 47
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 60,698
--------
Total current assets.............................. 60,698
--------
Fixed assets................................................ 60,947
Deferred organizational costs............................... 47,400
Contribution receivable..................................... 25,000
Other assets................................................ 1,000
--------
TOTAL ASSETS...................................... $195,045
========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable....................................... $ 45,845
Note payable (Note 2).................................. 57,479
--------
TOTAL LIABILITIES................................. 103,324
--------
STOCKHOLDERS' EQUITY
Preferred stock, par value not stated; 10,000,000 shares
authorized, no shares issued and outstanding........... --
Common stock, par value $1.00 per share; 10,000,000 shares
authorized, no shares issued and outstanding........... --
Additional paid-in capital (Note 2)....................... 120,000
Deficit accumulated during the development stage.......... (28,279)
--------
TOTAL STOCKHOLDERS' EQUITY........................ 91,721
--------
Commitments and contingencies (Note 4)......................
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $195,045
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 48
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1997) TO DECEMBER 31, 1997
<TABLE>
<S> <C>
INCOME
Interest income........................................... $ 736
-------
Total Income...................................... 736
-------
EXPENSES
Salaries and employee benefits............................ 25,516
Other operating........................................... 3,499
-------
Total Expenses.................................... 29,015
-------
Income tax expense (benefit) (Note 3)..................... --
-------
NET LOSS.......................................... $28,279
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 49
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1997) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Capital contributions (Note 2)...................... $ -- $120,000 $ -- $120,000
Net Loss............................................ -- -- (28,279) (28,279)
-------- -------- -------- --------
Balance at December 31, 1997........................ $ -- $120,000 $(28,279) $ 91,721
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 50
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1997) TO DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (28,279)
Adjustments to reconcile net loss to net cash used
(provided) by operating activities:
Increase in contribution receivable.................... (25,000)
Increase in other assets............................... (1,000)
Increase in accounts payable........................... 45,845
---------
NET CASH USED BY OPERATING ACTIVITIES............. (8,434)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets................................. (60,947)
Deferred organization costs............................... (47,400)
---------
NET CASH USED BY INVESTING ACTIVITIES............. (108,347)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital contributions....................... 120,000
Proceeds from note payable................................ 57,479
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 177,479
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 60,698
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
--
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 60,698
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 51
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 5, 1997) TO DECEMBER 31, 1997
NOTE 1 -- ORGANIZATION
CNB Holdings, Inc. was formed to organize and own all of the capital stock
of Chattahoochee National Bank (the Bank); together they are herein referred to
as "the Company." The organizers of the Company filed an application to charter
the Bank as a national bank with the Office of the Comptroller of the Currency,
with the FDIC for deposit insurance and to conduct a commercial banking business
from Alpharetta, Georgia. Provided the necessary capital is raised and the
necessary regulatory approvals are received, it is expected that operations will
commence in the third quarter of 1998.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practices within the banking
industry.
The Company plans to raise a minimum of $11,000,000 through two offerings
of its $1.00 par value common stock at a purchase price of $10.00 per share. The
organizers, directors and members of their immediate families expect to purchase
a total of 200,000 units, which consist of one share of common stock and one
warrant, at an aggregate purchase price of $2,000,000 in a private offering (see
Note 2). In recognition of the financial risks they have undertaken in
organizing the Company and its bank subsidiary, for each $10 purchase, each
organizer will receive a unit consisting of one share of common stock and one
warrant to purchase an additional share of common stock at $10 per share.
Upon the completion of the sale of common stock and the opening of the
Bank, incurred organizational costs, estimated to be $150,000 ($100,000 for the
Bank and $50,000 for the Company, consisting principally of legal, regulatory,
consulting and incorporation fees) will be deferred and amortized over the
Bank's and the Company's initial 60 months of operations. Offering expenses,
estimated to be $775,000, (consisting principally of direct incremental and
underwriting costs of the stock offering) will be deducted from the proceeds of
the offering, and pre-opening expenses, estimated to be $250,000, (consisting
principally of salaries, overhead and other operating costs) will be charged
against the initial period's operating results.
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks.
NOTE 2 -- LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Company incurred a net loss of $28,279 for the period from inception
(November 5, 1997) to December 31, 1997. Operations through December 31, 1997,
relate primarily to expenditures for incorporating and organizing the Company.
At December 31, 1997, the Company had been totally funded by $120,000 in
capital contributions from the organizers. These capital contributions are
without interest, at risk of loss and are not guaranteed to be paid back to the
organizers.
Management believes that the current level of expenditures is well within
the financial capabilities of the organizers and is adequate to meet existing
obligations and fund current operations, but commencing banking operations is
dependent upon the Company successfully completing the stock offering and
obtaining regulatory approval.
In addition to the organizer's private offering, the Company is currently
anticipating offering a minimum of 900,000 and a maximum of 1,035,000 shares of
its common stock, $1.00 par value, at $10 per share in an initial public
offering. Costs related to the organization and registration of the Company's
common stock will be paid from the gross proceeds of the offering. Should
subscriptions for the minimum private and initial offerings not be obtained,
amounts paid by organizers and subscribers with their subscriptions will be
returned, net of expenses, and the offer will be withdrawn. (See Note 1).
F-7
<PAGE> 52
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On December 24, 1997, the Company entered into a 60-month installment loan
of $57,478.75, payable at $975.00 per month until maturity on December 24, 2002.
This loan is secured by an automobile and bears an interest rate of 9.0 percent.
NOTE 3 -- INCOME TAXES
There was no provision (benefit) for income taxes for the period from
inception (November 5, 1997) to December 31, 1997, due to the Company's net
operating loss and its valuation reserve against deferred tax assets.
The following difference gives rise to deferred income taxes as of December
31, 1997:
<TABLE>
<S> <C>
Net operating loss carryforward............................. $ 9,615
Valuation reserve........................................... (9,615)
-------
Net deferred tax asset...................................... $ --
=======
</TABLE>
As of December 31, 1997, the Company has a net operating loss carryforward
of approximately $28,279.
NOTE 4 -- COMMITMENTS
The Company entered into a letter of employment with the President and
Chief Executive Officer of the Bank. The letter of employment continues for
three years and provides for an annual base salary of $125,000 per year with a
2 1/2 percent increase on the anniversary date of the opening of the Bank, plus
an annual medical insurance premium and such other benefits as hospitalization,
disability and life insurance, which are generally made available to other
senior executives of the Company and the Bank.
F-8
<PAGE> 53
ACCOUNTANTS' REVIEW REPORT
The Board of Directors
CNB Holdings, Inc.
(A Development Stage Corporation)
Atlanta, Georgia
We have reviewed the accompanying balance sheet of CNB Holdings, Inc. (a
development stage corporation) as of April 30, 1998, and the related statements
of operations and retained earnings, and cash flows for the four-month period
then ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of CNB Holdings, Inc.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
As discussed in Note 6, certain conditions indicate that CNB Holdings, Inc.
may be unable to continue as a going concern. The accompanying financial
statements do not include any adjustments that might be necessary should CNB
Holdings, Inc. be unable to continue as a going concern.
/s/ BRICKER & MELTON, P.A.
--------------------------------------
Bricker & Melton, P.A.
May 12, 1998
Duluth, Georgia
F-9
<PAGE> 54
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash and due from banks..................................... $ 566,820
Interest-bearing deposits with banks........................ 1,450,052
Federal funds sold.......................................... 250,000
Certificate of deposit (Note 5)............................. 70,000
Premises and equipment, net (Note 2)........................ 61,606
Deferred organizational costs............................... 117,995
Other assets................................................ 33,090
----------
Total Assets...................................... $2,549,563
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable............................................ $ 64,541
Due to organizers (Note 4).................................. 520,000
Note payable (Note 2)....................................... 54,554
Other liabilities........................................... 89,978
----------
Total Liabilities................................. 729,073
----------
STOCKHOLDERS' EQUITY (Note 4)
Common stock, par value $1.00 per share; 10,000,000 shares
authorized, 200,000 shares issued and outstanding......... 200,000
Additional paid-in capital.................................. 1,767,500
Deficit accumulated during the development stage............ (147,010)
----------
Total Stockholders' Equity........................ 1,820,490
----------
Commitments and contingencies (Note 5)
Total Liabilities and Stockholders' Equity........ $2,549,563
==========
</TABLE>
See the accompanying notes and accountants' review report.
F-10
<PAGE> 55
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INTEREST INCOME
Interest-bearing deposits in banks........................ $ 52
---------
Total Interest Income............................. 52
---------
INTEREST EXPENSE
Total Interest Expense............................ --
---------
NET INTEREST INCOME............................... 52
PROVISION FOR LOAN LOSSES................................... --
---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES............................................ 52
OTHER INCOME
Total Other Income................................ --
---------
OTHER EXPENSE
Salaries and other compensation........................... 67,434
Employee benefits......................................... 22,406
Net occupancy and equipment expense....................... 17,563
Professional and other outside services................... 2,166
Other expense............................................. 9,214
---------
Total Other Expenses.............................. 118,783
---------
LOSS BEFORE INCOME TAXES.......................... (118,731)
INCOME TAX BENEFIT (Note 3)................................. --
---------
NET LOSS.......................................... $(118,731)
=========
</TABLE>
See the accompanying notes and accountants' review report.
F-11
<PAGE> 56
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FOUR MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON PAID-IN DEVELOPMENT
STOCK CAPITAL STAGE TOTAL
-------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997..................... $ -- $ 120,000 $ (28,279) $ 91,721
Capital contributions by organizers.............. -- 400,000 -- 400,000
Net loss......................................... -- -- (118,731) (118,731)
Sale of private placement common stock........... 200,000 1,767,500 -- 1,967,500
Repayment of capital contributions by
organizers..................................... -- (520,000) -- (520,000)
-------- ---------- --------- ----------
BALANCE AT APRIL 30, 1998........................ $200,000 $1,767,500 $(147,010) $1,820,490
======== ========== ========= ==========
</TABLE>
See the accompanying notes and accountants' review report.
F-12
<PAGE> 57
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (118,731)
Adjustments to reconcile net loss to net cash used
(provided) by operating activities:
Depreciation of premises and equipment................. 7,098
Decrease in contribution receivable.................... 25,000
Increase in other assets............................... (32,090)
Increase in accounts payable........................... 538,696
Increase in other liabilities.......................... 89,978
----------
NET CASH USED BY OPERATING ACTIVITIES............. 509,951
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets................................. (7,757)
Purchase of certificate of deposit........................ (70,000)
Deferred organizational costs............................. (70,595)
----------
NET CASH USED BY INVESTING ACTIVITIES............. (148,352)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of the private placement common
stock.................................................. 1,967,500
Proceeds from capital contributions by organizers......... 400,000
Repayment of capital contributions by organizers.......... (520,000)
Repayment of note payable................................. (2,925)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 1,844,575
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 2,206,174
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 60,698
----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $2,266,872
==========
</TABLE>
See the accompanying notes and accountants' review report.
F-13
<PAGE> 58
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE FOUR MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
CNB Holdings, Inc. was formed to organize and own all of the capital stock
of Chattahoochee National Bank (the "Bank"); together they are herein referred
to as the "Company." The organizers of the Company filed an application to
charter the Bank as a national bank with the Office of the Comptroller of the
Currency, with the FDIC for deposit insurance and to conduct a commercial
banking business from Alpharetta, Georgia. Provided the necessary capital is
raised and the necessary regulatory approvals are received, it is expected that
operations will commence in the third quarter of 1998.
In a private placement that closed on April 30, 1998, the organizers
purchased a total of 200,000 shares of common stock at an aggregate purchase
price of $2,000,000, or $10.00 per share.
In addition to the organizers' private offering, the Company is currently
anticipating offering a minimum of 900,000 and a maximum of 1,035,000 shares of
its common stock, $1.00 par value, at $10 per share in an initial public
offering. Costs related to the organization and registration of the Company's
common stock will be paid from the gross proceeds of the offering. Should
subscriptions for the minimum private and initial offerings not be obtained,
amounts paid by organizers and subscribers with their subscriptions will be
returned, net of expenses, and the offer will be withdrawn.
Upon the completion of the sale of common stock and the opening of the
Bank, incurred organizational costs, estimated to be $150,000 ($100,000 for the
Bank and $50,000 for the Company, consisting principally of legal, regulatory,
consulting and incorporation fees) will be deferred and amortized over the
Bank's and the Company's initial 60 months of operations. Offering expenses,
estimated to be $775,000, (consisting principally of direct incremental and
underwriting costs of the stock offering) will be deducted from the proceeds of
the offering, and pre-opening expenses, estimated to be $250,000, (consisting
principally of salaries, overhead and other operating costs) will be charged
against the initial period's operating results.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and to general practices within the banking
industry. The following is a summary of the more significant of these policies:
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Generally, federal
funds are purchased and sold for one-day periods.
CERTIFICATE OF DEPOSIT
The certificate of deposit is carried at cost, and accordingly, earnings
are reported when interest is accrued.
PREMISES AND EQUIPMENT
Premises and equipment are reported at cost, less accumulated depreciation.
For financial reporting purposes, depreciation is computed using primarily
straight-line methods over the estimated useful lives of the assets.
F-14
<PAGE> 59
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED ORGANIZATIONAL COSTS
Organizational expenses include consulting fees, expenses for market
analysis and feasibility studies, and legal and accounting fees and expenses.
The organizational expenses will be capitalized and amortized to expense over a
60-month period from the date of inception.
INCOME TAXES
The tax effects of transactions are recorded at current tax rates in the
periods in which the transactions are reported for financial statement purposes.
Deferred income taxes is established for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such amounts are
realized or settled.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 2 -- PREMISES AND EQUIPMENT
The components of premises and equipment as of April 30, 1998, consist of
the following:
<TABLE>
<S> <C>
Furniture and fixtures...................................... $ 262
Office equipment............................................ 10,463
Automobile.................................................. 57,979
-------
68,704
Accumulated depreciation.................................... (7,098)
-------
$61,606
=======
</TABLE>
On December 24, 1997, the Company entered into a 60-month installment loan
of $57,478.75, payable at $975.00 per month until maturity on December 24, 2002.
This loan is secured by an automobile and bears an interest rate of 9.0 percent.
NOTE 3 -- INCOME TAXES
There was no provision (benefit) for income taxes for the four-month period
ended April 30, 1998, due to the Company's net operating loss and its valuation
reserve against deferred tax assets.
The following difference gives rise to deferred income taxes as of April
30, 1998:
<TABLE>
<S> <C>
Net operating loss carryforward............................. $ 49,983
Valuation reserve........................................... (49,983)
--------
Net deferred tax asset...................................... $ --
========
</TABLE>
As of April 30, 1998, the Company has a net operating loss carryforward of
approximately $147,010.
NOTE 4 -- STOCKHOLDERS' EQUITY
From inception on November 5, 1997, until April 30, 1998, the Company had
been totally funded by $520,000 in capital contributions from the organizers.
These capital contributions were without interest, at risk of loss, and not
guaranteed to be paid back to the organizers.
F-15
<PAGE> 60
CNB HOLDINGS, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In a private placement that closed on April 30, 1998, the organizers
purchased a total of 200,000 units for $2,000,000 or $10.00 per unit, before
deducting $32,500 in offering expenses. Proceeds from this private placement
will be utilized to repay the organizers their $520,000 initial capital
contribution, without interest, and provide working capital for the Company.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
The Company entered into a letter of employment with the President and
Chief Executive Officer of the Bank. The letter of employment continues for
three years and provides for an annual base salary of $125,000 per year with a
2 1/2 percent increase on the anniversary date of the opening of the Bank, plus
an annual medical insurance premium and such other benefits as hospitalization,
disability and life insurance, which are generally made available to other
senior executives of the Company and the Bank.
On March 24, 1998, the Company entered into a lease agreement for office
space at its planned main office location, subject to the following conditions:
(i) preliminary and final charter approval is received from the Office of the
Comptroller of the Currency, (ii) the Federal Deposit Insurance Corporation
(FDIC) approves said chartered association for FDIC-provided insurance, and
(iii) the Company raises not less than $10,000,000 in capital. The anticipated
commencement date of the lease is April 1, 1998, with a five-year initial term.
The monthly base rent will be $6,285.52 per month. The lessor also required that
a $70,000 irrevocable standby letter of credit be provided to begin the
Company's build-out of the property. This irrevocable standby letter of credit
expires on October 27, 1998, and is secured by a $70,000 certificate of deposit
purchased by the Company.
On March 10, 1998, the Company entered into an agreement for the data
processing applications and implementation of the Company's electronic data
processing system. The monthly expenses are based on the types and number of
activities on a monthly basis.
On April 27, 1998, the Company entered into a software license agreement
for certain platform software applications for a total payment of $32,900. No
payment has been made as of April 30, 1998.
NOTE 6 -- GOING CONCERN
The Company was formed to organize and own all of the capital stock of the
Bank. The organizers of the Company filed an application with the OCC to charter
the Bank as a national bank and with the FDIC to obtain deposit insurance. In
addition to the organizers' private offering, the Company is currently
anticipating an initial offering to raise additional capital.
The ability of the Company to continue as a going concern is dependent upon
the success of obtaining the regulatory approvals and obtaining the required
minimum capital. The financial statements do not include any adjustments that
might be necessary should the Company be unable to continue as a going concern.
F-16
<PAGE> 61
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED HEREBY
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
UNTIL , 1998 (FOR DAYS AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 3
Organizers' Offering.................. 6
Use of Proceeds....................... 7
Dilution.............................. 8
Capitalization........................ 10
Dividends............................. 11
Management's Discussion and Analysis
or Plan of Operation................ 12
Proposed Business of the Company and
the Bank............................ 15
Management............................ 20
Description of Capital Stock of the
Company............................. 28
Shares Eligible for Future Sale....... 32
Underwriting.......................... 32
Supervision and Regulation............ 33
Legal Proceedings..................... 40
Legal Matters......................... 40
Experts............................... 40
Reports to Shareholders............... 40
Additional Information................ 40
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
900,000 SHARES
(CNB HOLDINGS, INC.(TM) LOGO)
A PROPOSED BANK HOLDING COMPANY
FOR
CHATTAHOOCHEE
NATIONAL BANK
(IN ORGANIZATION)
COMMON STOCK
--------------------
PROSPECTUS
--------------------
J.C. BRADFORD & CO.
, 1998
======================================================
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Consistent with the pertinent provisions of the laws of Georgia, the
Registrant's Bylaws provide that the Registrant shall have the power to
indemnify its directors and officers against expenses (including attorneys'
fees) and liabilities arising from actual or threatened actions, suits or
proceedings, whether or not settled, to which they become subject by reason of
having served in such role if such director or officer acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Registrant and, with respect to a criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Advances against expenses
shall be made so long as the person seeking indemnification agrees to refund the
advances if it is ultimately determined that he is not entitled to
indemnification. A determination of whether indemnification of a director or
officer is proper because he met the applicable standard of conduct shall be
made (a) by the Board of Directors of the Registrant, (b) in certain
circumstances, by independent legal counsel in a written opinion or (c) by the
affirmative vote of a majority of the shares entitled to vote.
In addition, Article XVII of the Registrant's Articles of Incorporation,
subject to certain exceptions, eliminates the potential personal liability of a
director for monetary damages to the Registrant and to the shareholders of the
Registrant for breach of a duty as a director. There is no elimination of
liability for (a) a breach of duty involving appropriation of a business
opportunity of the Registrant, (b) an act or omission involving intentional
misconduct or a knowing violation of law, (c) a transaction from which the
director derives an improper personal benefit or (d) as to any payment of a
dividend or approval of a stock repurchase that is illegal under the Georgia
Business Corporation Code. The Articles of Incorporation do not eliminate or
limit the right of the Registrant or its shareholders to seek injunctive or
other equitable relief not involving monetary damages.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses, other than underwriting discounts and commissions, of
the sale of the Registrant's Common Stock, $1.00 par value, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 3,053
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 1,535
Transfer Agent and Registration Fees........................ 4,000
Blue Sky Fees and Expenses.................................. 6,090
Legal Fees and Expenses..................................... 75,000
Accounting Fees and Expenses................................ 40,000
Printing and Engraving Expenses............................. 32,500
Miscellaneous............................................... 5,000
Total............................................. $167,178
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On April 30, 1998, the Registrant issued to the organizers of the
Registrant and their affiliates (17 investors) in a private placement exempt
from registration under Section 4(2) of and Rule 506 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), an aggregate of
200,000 shares of Common Stock for an aggregate purchase price of $2,000,000.
All of the shares of Common Stock were acquired by the organizers for
investment purposes and with no view toward the resale or distribution thereof.
The offers and sales were made without public solicitation, and the stock
certificates bear restrictive legends. No underwriter was involved in the
transactions, and no commissions were paid.
II-1
<PAGE> 63
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
3.1* -- Articles of Incorporation
3.2* -- Bylaws
4.1 -- Specimen Common Stock Certificate
4.2* -- See Exhibits 3.1 and 3.2 hereto for provisions of the
Articles of Incorporation and Bylaws defining rights of
holders of the Common Stock.
5.1* -- Legal Opinion of Troutman Sanders LLP
10.1 -- Shopping Center Form Lease, dated March 23, 1998, between
W.B. Wiggins, Jr., and Chattahoochee National Bank
10.2 -- Employment Agreement, dated as of November 1, 1997 among
Chattahoochee National Bank (In Organization), CNB Holdings,
Inc. and H.N. Padget, Jr.
10.3 -- CNB Holdings, Inc. Amended and Restated Non Qualified Stock
Option Plan
10.4* -- CNB Holdings, Inc. 1998 Incentive Stock Option Plan and Form
of Incentive Stock Option Agreement
21.1* -- Subsidiaries of CNB Holdings, Inc.
23.1 -- Consent of Bricker & Melton, P.A.
23.2* -- Consent of Troutman Sanders LLP (contained in Exhibit 5.1)
24.1* -- Power of Attorney
27.1* -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
* Previously filed.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to foregoing provisions, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes as follows:
(a)(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
II-2
<PAGE> 64
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities being registered that remain unsold at the end of the offering.
The Registrant hereby undertakes as follows:
(1) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-3
<PAGE> 65
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Amendment No. 1
to the Registration Statement to be signed on its behalf by the undersigned in
the city of Alpharetta, State of Georgia, on May 26, 1998.
CNB HOLDINGS, INC.
By: /s/ H. N. PADGET, JR.
------------------------------------
H. N. Padget, Jr.
President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ H. N. PADGET, JR. President, Chief Executive May 26, 1998
- ----------------------------------------------------- Officer and Director
H. N. Padget, Jr.
* Chairman of the Board of May 26, 1998
- ----------------------------------------------------- Directors
W. David Sweatt
/s/ VALERIE DONNELL Chief Financial Officer May 26, 1998
- -----------------------------------------------------
Valerie Donnell
* Director May 26, 1998
- -----------------------------------------------------
Michael L. Aldredge
* Director May 26, 1998
- -----------------------------------------------------
C. Dan Alford
* Director May 26, 1998
- -----------------------------------------------------
Patricia R. Grimes
* Secretary and Director May 26, 1998
- -----------------------------------------------------
William H. Groce, Jr.
* Director May 26, 1998
- -----------------------------------------------------
David R. Hink
* Director May 26, 1998
- -----------------------------------------------------
Mary E. Johnson
Director
- -----------------------------------------------------
Robert W. Johnston
* Director May 26, 1998
- -----------------------------------------------------
Heber N. Padget, Sr.
</TABLE>
II-4
<PAGE> 66
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director May 26, 1998
- -----------------------------------------------------
John A. Pond
* Director May 26, 1998
- -----------------------------------------------------
Reid W. Simmons
* Director May 26, 1998
- -----------------------------------------------------
W. Darrell Sumner
*By: /s/ H. N. PADGET, JR.
- -----------------------------------------------------
H. N. Padget, Jr.
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGE
- ------- ----------- -------------
<C> <S> <C> <C>
1.1 -- Form of Underwriting Agreement..............................
3.1* -- Articles of Incorporation...................................
3.2* -- Bylaws......................................................
4.1 -- Specimen Common Stock Certificate...........................
4.2* -- See Exhibits 3.1 and 3.2 hereto for provisions of the
Articles of Incorporation and Bylaws defining rights of
holders of the Common Stock.................................
5.1* -- Legal Opinion of Troutman Sanders LLP.......................
10.1 -- Shopping Center Form Lease, dated March 23, 1998, between
W.B. Higgins, Jr. and Chattahooche National Bank............
10.2 -- Employment Agreement, dated as of November 1, 1997 among
Chattahooche National Bank (In Organization), CNB Holdings,
Inc. and H. N. Padget, Jr. .................................
10.3 -- CNB Holdings, Inc. Amended and Restated Non Qualified Stock
Option Plan.................................................
10.4* -- CNB Holdings, Inc. 1998 Incentive Stock Option Plan and Form
of Incentive Stock Option Agreement.........................
21.1* -- Subsidiaries of CNB Holdings, Inc. .........................
23.1 -- Consent of Bricker & Melton, P.A. ..........................
23.2* -- Consent of Troutman Sanders LLP )(contained in Exhibit
5.1)........................................................
24.1* -- Power of Attorney...........................................
27.1* -- Financial Data Schedule (for SEC use only)..................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
May 22, 1998 Draft
CNB HOLDINGS, INC.
900,000 COMMON SHARES
UNDERWRITING AGREEMENT
June ___, 1998
J.C. BRADFORD & CO., L.L.C.
As Representative of the Underwriters
c/o J.C. Bradford & Co., L.L.C.
330 Commerce Street
Nashville, Tennessee 37201
Ladies and Gentlemen:
CNB Holdings, Inc., a Georgia corporation (the "Company") and proposed
holding company for Chattahoochee National Bank (In Organization) (the "Bank"),
proposes to issue and sell to the underwriters named in Schedule I hereto (the
"Underwriters") for whom you are acting as the representative (the
"Representative") 900,000 shares (collectively, the "Firm Shares"), of the
common stock, $1.00 par value per share (the "Common Shares"), of the Company.
The Firm Shares are to be sold to the Underwriters, acting severally and not
jointly, in such amounts as are set forth in Schedule I hereto opposite the name
of such Underwriter. The Company proposes to grant to the Underwriters an option
to purchase up to 135,000 additional Common Shares as provided for in Section 2
of this Agreement for the purpose of covering over-allotments (the "Option
Shares"). The Firm Shares and the Option Shares purchased pursuant to this
Agreement are herein called the "Shares."
1. Representations and Warranties of the Company. The Company
represents and warrants with respect to itself and the Bank to, and agrees with,
each of the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), a registration statement on Form SB-2
(Registration No. 333-49137), including the related preliminary
prospectus relating to the Shares. Copies of the registration statement
and any amendments, including any post-effective amendments, and all
forms of the related prospectuses contained therein and any supplements
thereto, have
1
<PAGE> 2
been delivered to you. Such registration statement on Form SB-2,
including the prospectus, Part II, all financial schedules and exhibits
thereto, all information deemed to be a part of such registration
statements pursuant to Rule 430A under the Securities Act and any
related registration statement filed pursuant to Rule 462(b) under the
Securities Act, at the time when they shall become effective are herein
referred to as the "Registration Statement," and the prospectus
included as part of the Registration Statement on file with the
Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430A of the Rules and
Regulations (as defined below) and in the form filed pursuant to Rule
424(b) under the Securities Act is herein referred to as the "Final
Prospectus." The prospectus included as part of the Registration
Statement on the date when the Registration Statement became effective
is referred to herein as the "Effective Prospectus." Any prospectus
included in the Registration Statement and in any amendment thereto
prior to the effective date of the Registration Statement is referred
to herein as a "Preliminary Prospectus." For purposes of this
Agreement, "Rules and Regulations" mean the rules and regulations
promulgated by the Commission under either the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus, at the time of filing thereof, complied with the
requirements of the Securities Act and the Rules and Regulations, and
did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; except that the foregoing does
not apply to statements or omissions made in reliance upon and in
conformity with written information relating to any Underwriter
furnished to the Company by any Underwriter specifically for use
therein. When the Registration Statement becomes effective and at all
times subsequent thereto up to and including the First Closing Date and
the Option Closing Date (as hereinafter defined), (i) the Registration
Statement, the Effective Prospectus and Final Prospectus and any
amendments or supplements thereto will contain all statements which are
required to be stated therein in accordance with the Securities Act and
the Rules and Regulations and will comply with the requirements of the
Securities Act and the Rules and Regulations, and (ii) neither the
Registration Statement, the Effective Prospectus nor the Final
Prospectus nor any amendment or supplement thereto will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not
misleading; except that the foregoing does not apply to statements or
omissions made in reliance upon and in conformity with written
2
<PAGE> 3
information relating to any Underwriter furnished to the Company by any
Underwriter specifically for use therein.
(c) The Company is duly formed and validly existing and in
good standing under the laws of the State of Georgia with full power
and authority to own its properties and conduct its business as now
conducted and is duly qualified or authorized to do business and is in
good standing in all jurisdictions where the failure to so qualify
could have a material adverse effect upon the conduct of business or
the ownership or leasing of property by the Company in such
jurisdiction. The Bank is a national banking association in
organization and upon the issuance of a charter by the Office of the
Comptroller of the Currency all shares of capital stock of the Bank
will be issued to the Company free and clear of any liens, claims, or
encumbrances of any kind, and the Bank will become a wholly owned
subsidiary of the Company. The Company and the Bank have obtained or
have filed for all material licenses, consents and approvals, and have
satisfied or have taken all action required at this time to satisfy all
material eligibility and other similar requirements imposed by federal
and state regulatory bodies, administrative agencies or other
governmental bodies, agencies or officials, in each case applicable to
the conduct of the business in which they are engaged or are
contemplated to be engaged as described in the Effective Prospectus and
the Final Prospectus. With respect to any material licenses, consents
and approvals, and any material eligibility and other similar
requirements that the Company or the Bank does not have at this time,
(i) all applications therefor are complete, accurate, and have been
filed with the appropriate regulatory authorities, and (ii) the Company
knows of no reason why the same will not be received or satisfied prior
to the time the same are required. Other than the Bank, the Company
does not have a direct or indirect ownership interest in any
corporation, joint venture, partnership or other entity.
(d) The capitalization of the Company is as set forth under
the caption "Capitalization" in the Effective Prospectus and the Final
Prospectus, and the Company's capital stock conform to the description
thereof contained under the caption "Description of Capital Stock of
the Company" in the Effective Prospectus and the Final Prospectus. All
the issued capital stock of the Company has been duly authorized and
validly issued, are fully paid and nonassessable. None of the issued
capital stock of the Company has been issued in violation of, or are
subject to, any preemptive or similar rights. The Shares to be sold by
the Company hereunder have been duly and validly authorized and, upon
issuance and delivery and payment therefor in the manner herein
described, will be validly issued, fully paid and nonassessable and
will not be subject to preemptive rights or other rights to subscribe
for or to purchase. Except as set forth in the Effective Prospectus and
the Final Prospectus, (i) the Company does not have outstanding any
options to
3
<PAGE> 4
purchase, or any rights or warrants to subscribe for, or any securities
or obligations convertible into, or any contracts or commitments to
issue or sell, any Common Shares and (ii) there are no preemptive
rights or other rights to subscribe for or to purchase, or any
restriction upon the transfer of, any Common Shares pursuant to the
Company's articles of incorporation, bylaws or any agreement or other
instrument to which the Company is a party or by which it may be bound.
Neither the filing of the Registration Statement nor the offer or sale
of the Shares as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or
relating to the registration of any Common Shares or any other
securities of the Company. The Underwriters will receive good and
marketable title to the Shares to be issued and delivered hereunder,
free and clear of all liens, encumbrances, claims, security interests,
restrictions, shareholders' agreements and voting trusts whatsoever.
(e) The form of share certificate to be used to evidence the
Common Shares will be in due and proper form and will comply with all
applicable legal requirements.
(f) All offers and sales by the Company of the Company's
securities prior to the date hereof were at all relevant times duly
registered or the subject of an available exemption from the
registration requirements of the Securities Act, were duly registered
or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws, and
were otherwise made in compliance with applicable law.
(g) The Company has full legal right, power and authority to
enter into this Agreement and to sell and deliver the Shares to be sold
by it to the several Underwriters as provided herein, and this
Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms. No
consent, approval, authorization or order of any court or governmental
agency or body or third party is required for the performance of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except such as have been obtained and
such as may be required by the National Association of Securities
Dealers, Inc. ("NASD") or under the Securities Act or state securities
or Blue Sky laws in connection with the purchase and distribution of
the Shares by the several Underwriters. The issue and sale of the
Shares by the Company, the Company's performance of this Agreement and
the consummation of the transactions contemplated hereby will not
result in a breach or violation of, or conflict with, any of the terms
and provisions of, or constitute a default by the Company under, any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company is a party or to which the
Company or any of its properties is
4
<PAGE> 5
subject, the articles of incorporation, bylaws or other governing
instruments of the Company or any statute or any judgment, decree,
order, rule or regulation of any court or governmental agency or body
applicable to the Company or any of its properties. Neither the Company
nor the Bank is in violation of its articles of incorporation or
association, bylaws or other governing instruments or any law,
administrative rule or regulation or arbitrators' or administrative
court decree, judgment or order or in violation or default (there being
no existing state of facts which with notice or lapse of time or both
would constitute a default) in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, deed of trust, mortgage, loan agreement, note,
lease, agreement or other instrument or permit to which it is a party
or by which it or any of its properties is or may be bound, except for
such violation or conflict which could not, singly or in the aggregate,
have a material adverse effect on the Company or the Bank or could not,
singly or in the aggregate, materially impair the performance by the
Company of its obligations under this Agreement.
(h) The consolidated financial statements, together with the
related schedules and notes, of the Company, included in the
Registration Statement, the Effective Prospectus and the Final
Prospectus, conform to the requirements of the Securities Act and the
Rules and Regulations. Such financial statements fairly present the
consolidated financial position of the Company at the respective dates
indicated in accordance with generally accepted accounting principles
applied on a consistent basis for the periods indicated. The financial
and statistical data set forth in the Effective Prospectus and the
Final Prospectus fairly presents the information set forth therein on
the basis stated in the Effective Prospectus and the Final Prospectus.
Bricker & Melton, P.A., whose report is included in the Effective
Prospectus and the Final Prospectus, are independent accountants as
required by the Securities Act and the Rules and Regulations.
(i) Neither the Company nor the Bank has sustained any
material loss or interference with its business or properties which is
not disclosed in the Effective Prospectus and the Final Prospectus; and
subsequent to the respective dates as of which information is given in
the Registration Statement, the Effective Prospectus and the Final
Prospectus, (i) neither the Company nor the Bank has incurred any
material liabilities or obligations, direct or contingent, or entered
into any transactions not in the ordinary course of business, (ii)
there has not been any issuance of options, warrants or rights to
purchase interests in, or the capital stock of, the Company except as
set forth in the Registration Statement, the Effective Prospectus and
the Final Prospectus, and (iii) there has not been any material adverse
change, or any development involving a prospective material adverse
change, in the general affairs, management, business, prospects,
financial position, net
5
<PAGE> 6
worth or results of operations of the Company or the Bank, except in
each case as described in the Effective Prospectus and the Final
Prospectus.
(j) Except as described in the Effective Prospectus and the
Final Prospectus, there is not pending, or to the knowledge of the
Company threatened, any legal or governmental action, suit, proceeding,
inquiry or investigation, to which the Company, the Bank, or any of
their respective executive officers or directors in such capacities, is
a party, or to which the property of the Company or the Bank is
subject, before or brought by any court or governmental agency or body,
wherein an unfavorable decision, ruling or finding could prevent or
materially hinder the consummation of this Agreement or result in a
material adverse change in the business condition (financial or other),
prospects, financial position, net worth or results of operations of
the Company or the Bank.
(k) [INTENTIONALLY OMITTED].
(l) Neither the Company, nor any of its directors, executive
officers or controlling persons, has taken or will take, directly or
indirectly, any action resulting in a violation of Regulation M under
the Exchange Act, or designed to cause or result under the Exchange Act
or otherwise in, or which has constituted or which reasonably might be
expected to constitute, the stabilization or manipulation of the price
of any securities of the Company or facilitation of the sale or resale
of the Shares.
(m) There are no contracts or other documents required by the
Securities Act or by the Rules and Regulations to be described in the
Registration Statement, the Effective Prospectus or the Final
Prospectus or to be filed as exhibits to the Registration Statement
which have not been described or filed as required. All such contracts
to which the Company or the Bank is a party have been duly authorized,
executed and delivered by such party, constitute valid and binding
agreements of such party and are enforceable against such party in
accordance with the terms thereof. The Company and the Bank have
performed all material obligations required to be performed by them,
and are neither in default in any material respect nor have they
received notice of any default or dispute under, any such contract or
other material instrument to which they are a party or by which their
property is bound or affected. To the knowledge of the Company, no
other party under any such contract or other material instrument to
which it or the Bank is a party is in default in any material respect
thereunder.
(n) The Company's system of internal accounting controls for
itself and the Bank is sufficient to meet applicable regulatory
requirements and the broad objectives of internal accounting controls
insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts
6
<PAGE> 7
that would be material in relation to the Company's consolidated
financial statements.
(o) The Company and the Bank have filed all foreign, federal,
state and local income and franchise tax returns required to be filed
through the date hereof and have paid all taxes shown as due therefrom
to the extent such taxes have become due and are not being contested in
good faith; and there is no tax deficiency that has been, nor does the
Company have knowledge of any tax deficiency which is likely to be,
asserted against the Company or the Bank, which if determined adversely
could materially and adversely affect the earnings, assets, affairs,
business prospects or condition (financial or other) of the Company or
the Bank.
(p) Neither the Company nor the Bank has failed to file with
the applicable regulatory authorities any material statements, reports,
information or forms required by applicable laws, regulations or
orders; all such filings or submissions were in material compliance
with applicable laws when filed, and no material deficiencies have been
asserted by any regulatory commission, agency or authority with respect
to such filings or submissions. Neither the Company nor the Bank has
failed to maintain in full force and effect any material licenses,
registrations or permits necessary or proper for the conduct of its
business, or received any notification that any revocation or
limitation thereof is threatened or pending, and there is not to the
knowledge of the Company pending any change under any law, regulation,
license or permit which would materially adversely affect the business,
operations, property or business prospects of the Company or the Bank.
Neither the Company nor the Bank has received any notice of violation
of or to the Company's knowledge, been threatened with a charge of
violating and to the Company's knowledge is not under investigation
with respect to a possible violation of any provision of any law,
regulation or order.
(q) No labor dispute exists or is imminent with any of the
employees of the Company or the Bank or otherwise which could
materially adversely affect the Company or the Bank. The Company is not
aware of any existing or imminent labor disturbance by employees of the
Company or the Bank which could be expected to materially adversely
affect the condition (financial or otherwise), results of operations,
properties, affairs, management, business affairs or business prospects
of the Company or the Bank. The Company and the Bank are in compliance
with all federal, state and local employment and labor laws, including,
but not limited to, laws relating to non-discrimination in hiring,
promotion and pay of employees.
(r) The Company and the Bank own or is in the process of
obtaining or can obtain on reasonable terms all material licenses,
copyrights, trademarks, service marks and trade names presently
employed by them in
7
<PAGE> 8
connection with the businesses proposed to be operated by them,
respectively, and neither the Company nor the Bank has received any
notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing which, alone or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, could
result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Company or the Bank.
(s) The Company and the Bank are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
they are engaged and in which they propose to engage; and the Company
has no reason to believe that it or the Bank will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business.
(t) None of the Company, the Bank, nor, to the knowledge of
the Company, any director or executive officer, agent, employee or
other person acting on behalf of the Company or the Bank has (i) used,
or authorized the use of, any corporate or other funds for unlawful
payments, or contributions, (ii) made unlawful expenditures relating to
political activity to government officials, or (iii) established or
maintained any unlawful or unrecorded funds in violation of any
federal, state, or local law or regulation, including Section 30A of
the Exchange Act. None of the Company, the Bank, nor, to the knowledge
of the Company, any director or executive officer of the Company or the
Bank has accepted or received any unlawful contributions, or payments.
(u) The Company is not, will not become as a result of the
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become, an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters the Firm Shares, and each of the Underwriters, severally
and not jointly, agrees to purchase at a purchase price of $________
per share, the number of Firm Shares set forth opposite such
Underwriter's name in Schedule I hereto. The Underwriters agree to
offer the Firm Shares to the public on the terms set forth in the Final
Prospectus under the caption "Underwriting."
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<PAGE> 9
(b) The Company hereby grants to the Underwriters an option to
purchase, solely for the purpose of covering over-allotments in the
sale of Firm Shares, all or any portion of the Option Shares at the
purchase price per share set forth above. The option granted hereby may
be exercised as to all or any part of the Option Shares at any time
(but only once) within 30 days after the date of the Final Prospectus.
The Underwriters shall not be under any obligation to purchase any
Option Shares prior to the exercise of such option. The option granted
hereby may be exercised by the Underwriters by the Representative
giving written notice to the Company setting forth the number of Option
Shares to be purchased and the date and time for delivery of and
payment for such Option Shares and stating that the Option Shares
referred to therein are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the
Firm Shares. If such notice is given prior to the First Closing Date
(as defined herein), the date set forth therein for such delivery and
payment shall not be earlier than two full business days thereafter or
the First Closing Date, whichever occurs later. If such notice is given
on or after the First Closing Date, the date set forth therein for such
delivery and payment shall not be earlier than three full business days
thereafter. In either event, the date so set forth shall not be more
than four full business days after the date of such notice. The date
and time set forth in such notice is herein called the "Option Closing
Date." Upon exercise of the option, the Company shall become obligated
to sell to the Underwriters, and, subject to the terms and conditions
herein set forth, the Underwriters shall become obligated to purchase,
for the account of each Underwriter, from the Company, severally and
not jointly, the number of Option Shares specified in such notice.
Option Shares shall be purchased for the accounts of the Underwriters
in proportion to the number of Firm Shares set forth opposite such
Underwriter's name in Schedule I hereto, except that the respective
purchase obligations of each Underwriter shall be adjusted so that no
Underwriter shall be obligated to purchase fractional Option Shares.
(c) The Company shall not be obligated to deliver any of the
Shares to be delivered on the First Closing Date or on the Option
Closing Date, as the case may be, except upon payment for all the
Shares to be purchased on such Closing Date, as provided herein.
(d) Certificates in definitive form for the Firm Shares which
each Underwriter has agreed to purchase hereunder shall be delivered by
or on behalf of the Company to the Representative for the account of
each Underwriter against payment by each such Underwriter or on its
behalf of the purchase price therefor by wire transfer of federal or
other immediately available funds to the order of the Company at an
account previously designated by the Company, at the offices of the
Representative, 330 Commerce Street, Nashville, Tennessee 37201, or at
such other place as may be agreed upon by the Representative and the
Company, at 10:00 A.M.,
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<PAGE> 10
Nashville time, on the third full business day after this Agreement
becomes effective, or, at the election of the Representative, on the
fourth full business day after this Agreement becomes effective, if it
becomes effective after 4:30 P.M. Eastern time, or at such other time
not later than the seventh full business day thereafter as the
Representative and the Company may determine, such time of delivery
against payment being herein referred to as the "First Closing Date."
The First Closing Date and the Option Closing Date are herein
individually referred to as the "Closing Date" and collectively
referred to as the "Closing Dates." Certificates in definitive form for
the Option Shares which each Underwriter shall have agreed to purchase
hereunder shall be similarly delivered by or on behalf of the Company
on the Option Closing Date. The certificates in definitive form for the
Shares to be delivered will be in good delivery form and in such
denominations and registered in such names as the Representative may
request not less than 48 hours prior to the First Closing Date or the
Option Closing Date, as the case may be. Such certificates will be made
available for checking and packaging at a location in New York, New
York as may be designated by the Representative, on a business day at
least 24 hours prior to the First Closing Date or the Option Closing
Date, as the case may be. It is understood that the Representative may
(but shall not be obligated to) make payment on behalf of any
Underwriter or Underwriters for the Shares to be purchased by such
Underwriter or Underwriters. No such payment shall relieve such
Underwriter or Underwriters from any of its or their obligations
hereunder.
3. Offering by the Underwriters. After the Registration Statement
becomes effective, the several Underwriters propose to offer for sale to the
public the Firm Shares and any Option Shares which may be sold at the price and
upon the terms set forth in the Final Prospectus.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters that:
(a) The Company shall comply with the provisions of and make
all requisite filings with the Commission pursuant to Rules 424 and
430A of the Rules and Regulations and shall notify the Representative
promptly (in writing, if requested) of all such filings. The Company
shall notify the Representative promptly of any request by the
Commission for any amendment of or supplement to the Registration
Statement, the Effective Prospectus or the Final Prospectus or for
additional information; the Company shall prepare and file with the
Commission, promptly upon the Representative's reasonable request, any
amendments of or supplements to the Registration Statement, the
Effective Prospectus or the Final Prospectus which, in the
Representative's reasonable opinion, may be necessary or advisable in
connection with the distribution of the Shares; and the Company shall
not file any amendment of or supplement to the Registration Statement,
the Effective Prospectus or the Final Prospectus which the
Representative promptly objects to after reasonable notice thereof. The
Company shall advise the Representative promptly of the issuance by the
Commission or any jurisdiction or other regulatory body of any stop
order or other order suspending the effectiveness of the Registration
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<PAGE> 11
Statement, suspending or preventing the use of any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or
suspending the qualification of the Shares for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such
purpose; and the Company shall use its best efforts to prevent the
issuance of any stop order or other such order and, should a stop order
or other such order be issued, to obtain as soon as possible the
lifting thereof.
(b) The Company will take or cause to be taken all necessary
action and furnish to whomever the Representative direct such
information as may be reasonably required in qualifying the Shares for
offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Underwriters may designate and will continue such
qualifications in effect for as long as may be reasonably necessary to
complete the distribution of the Shares.
(c) Within the time during which a Final Prospectus relating
to the Shares is required to be delivered under the Securities Act, the
Company shall comply with all requirements imposed upon it by the
Securities Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as is necessary to
permit the continuance of sales of or dealings in the Shares as
contemplated by the provisions hereof and the Final Prospectus. If
during such period any event occurs as a result of which the Final
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to
amend the Registration Statement or supplement the Final Prospectus to
comply with the Securities Act, the Company shall promptly notify the
Representative and shall amend the Registration Statement or supplement
the Final Prospectus (at the expense of the Company) so as to correct
such statement or omission or effect such compliance.
(d) The Company will furnish without charge to the
Representative and make available to the Underwriters copies of the
Registration Statement (four of which shall be signed and shall be
accompanied by all exhibits), each Preliminary Prospectus, the
Effective Prospectus and the Final Prospectus, and all amendments and
supplements thereto, including any prospectus or supplement prepared
after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriters may
reasonably request.
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<PAGE> 12
(e) The Company will (A) deliver to the Representative at such
office or offices as the Representative may designate as many copies of
the Preliminary Prospectus and Final Prospectus as the Representative
may reasonably request, (B) for a period of not more than nine months
after the Registration Statement becomes effective, send to the
Underwriters as many additional copies of the Final Prospectus and any
supplement thereto as the Representative may reasonably request, and
(C) following nine months after the Registration Statement becomes
effective, send to the Underwriters at their expense as many additional
copies of the Final Prospectus and any supplement thereto as the
Representative may reasonably request.
(f) The Company shall make generally available to its security
holders, in the manner contemplated by Rule 158(b) under the Securities
Act as promptly as practicable and in any event no later than 45 days
after the end of its fiscal quarter in which the first anniversary of
the effective date of the Registration Statement occurs, an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act covering a period of at least 12 consecutive months beginning after
the effective date of the Registration Statement.
(g) The Company will apply the net proceeds from the sale of
the Shares to be sold by it as set forth under the caption "Use of
Proceeds" in the Final Prospectus and will timely report such use of
proceeds pursuant to Item 701 of Regulations S-B and S-K in its
periodic reports filed pursuant to Section 13(a) and 15(d) of the
Exchange Act in accordance with Rule 463 of the Securities Act or any
successor provision.
(h) During a period of five years from the effective date of
the Registration Statement or such longer period as the Representative
may reasonably request, the Company will furnish to the Representative
copies of all reports and other communications (financial or other)
furnished by the Company to its shareholders and, as soon as available,
copies of any reports or financial statements furnished or filed by the
Company to or with the Commission or any national securities exchange
or market on which any class of securities of the Company may be
listed.
(i) The Company will, from time to time, after the effective
date of the Registration Statement file with the Commission such
reports as are required by the Securities Act, the Exchange Act and the
Rules and Regulations, and shall also file with foreign, state and
other governmental securities commissions in jurisdictions where the
Shares have been sold by the Underwriters (as the Representative shall
have advised the Company in writing) such reports as are required to be
filed by the securities acts and the regulations of those
jurisdictions.
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<PAGE> 13
(j) Except pursuant to this Agreement or with the
Representative's written consent, for a period of 180 days after
beginning on the effective date of the Registration Statement, the
Company will not, and the Company has provided agreements (the "Lockup
Agreements") executed by (i) each of its executive officers and
directors providing that for a period of 180 days after beginning on
the effective date of the Registration Statement, such person will not,
offer for sale, sell (other than the issuance by the Company of Common
Shares pursuant to the exercise of warrants or options granted pursuant
to existing warrants or employee benefit plans and agreements), grant
any options (other than pursuant to existing employee benefit plans and
agreements), rights or warrants with respect to any Common Shares,
securities convertible into Common Shares or any other capital stock of
the Company, or otherwise dispose of, directly or indirectly, any
Common Shares or such other securities or capital stock.
(k) Neither the Company nor any of its executive officers,
directors or affiliates will take, directly or indirectly, any action
resulting in a violation of Regulation M under the Exchange Act, or
designed to cause or result in, or which might constitute or be
expected to constitute, stabilization or manipulation of the price of
the Common Shares.
(l) The Company will either conduct its business and
operations as described in the Final Prospectus or, if the Company
makes any material change to its business or operations as so
conducted, promptly disclose such change generally to the Company's
security holders.
(m) If at any time during the 25 day period after the
Registration Statement is declared effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which, in the Representative's opinion, the market price for the Shares
has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or
amendment of the Final Prospectus), the Company will, after written
notice from the Representative advising it as to the effect set forth
above, prepare, consult with the Representative concerning the
substance of and, subject to the Rules and Regulations, disseminate a
press release or other public statement, reasonably satisfactory,
responding to or commenting on such rumor, publication or event.
(n) [INTENTIONALLY OMITTED].
5. Expenses. The Company agrees with the Underwriters that
(a) whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, the
Company will pay all fees and expenses incident to the performance of
the
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<PAGE> 14
obligations of the Company hereunder, including, but not limited to,
(i) the Commission's registration fee, (ii) the expenses of printing
(or reproduction) and distributing the Registration Statement
(including the financial statements therein and all amendments and
exhibits thereto), each Preliminary Prospectus, the Effective
Prospectus, the Final Prospectus, any amendments or supplements
thereto, any Marketing Materials (as defined herein) and this Agreement
and other underwriting documents, including Underwriter's
Questionnaires, Underwriter's Powers of Attorney, Blue Sky Memoranda,
Agreements Among Underwriters and Selected Dealer Agreements, (iii)
fees and expenses of accountants and counsel for the Company, (iv)
expenses of registration or qualification of the Shares under state
Blue Sky and securities laws, including the fees and disbursements of
counsel to the Underwriters in connection therewith, (v) filing fees
paid or incurred by the Underwriters in connection with filings with
the NASD, (vi) expenses of listing the outstanding Common Shares for
quotation on the OTCBB; (vii) all travel, lodging and living expenses
incurred by the Company in connection with marketing, dealer and other
meetings attended by the Company and the Underwriters in marketing the
Shares, (viii) the costs and charges of the Company's transfer agent
and registrar and the cost of preparing the certificates for the
Shares, and (ix) all other costs and expenses incident to the
performance of its obligations hereunder not otherwise provided for in
this Section; and (b) all out-of-pocket expenses, including counsel
fees, disbursements and expenses, incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Shares and proposing to purchase and purchasing the Shares under this
Agreement, will be borne and paid by the Company if the sale of the
Shares provided for herein is not consummated (x) by reason of the
termination of this Agreement by the Company pursuant to Section
12(a)(i) or (y) by reason of the termination of this Agreement by the
Representative pursuant to Section 12(b)(ii), (iii), (iv) or (v) of
this Agreement, provided that reimbursement as a result of this clause
(y) shall be limited to $60,000, including the fees and expenses of
Underwriter's counsel relating to the proposed offering.
6. Conditions of the Underwriters' Obligations. The respective
obligations of the Underwriters to purchase and pay for the Firm Shares shall be
subject to the accuracy of the representations and warranties of the Company
herein as of the date hereof and as of the Closing Date as if made on and as of
the Closing Date, to the accuracy of the statements of the Company's officers
made pursuant to the provisions hereof, to the performance by the Company of all
of its covenants and agreements hereunder and to the following additional
conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective not later than 5:30
P.M., Washington, D.C. time, on the day following the date of this
Agreement, or such later time
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<PAGE> 15
and date as shall have been consented to by the Representative and all
filings required by Rule 424 and Rule 430A of the Rules and Regulations
shall have been made; no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or to the knowledge of the
Company threatened or the Underwriters, shall be contemplated by the
Commission; any request of the Commission for additional information
(to be included in the Registration Statement or the Final Prospectus
or otherwise) shall have been complied with to the Representative's
reasonable satisfaction; and the NASD, upon review of the terms of the
public offering of the Shares, shall not have objected to such
offering, such terms or the Underwriters' participation in the same.
(b) The Representative shall not have advised the Company that
the Registration Statement, Preliminary Prospectus, the Effective
Prospectus or Final Prospectus, or any amendment or any supplement
thereto, contains an untrue statement of fact which, in the
Representative's reasonable judgment, is material, or omits to state a
fact which, in the Representative's reasonable judgment, is material
and is required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Representative shall have received an opinion, dated
the Closing Date, from Troutman Sanders LLP, counsel for the Company,
to the effect that:
(i) The Company has been duly formed and is validly
existing as a corporation under the laws of the State of
Georgia, with corporate power and authority to own its
properties and conduct its business as now conducted, and,
based solely on certificates from public officials, the
Company is duly qualified to transact business as a foreign
corporation in states where required and where failure to so
qualify would have a material adverse effect on the Company.
and is in good standing under the laws of Georgia. The Bank is
a national banking association in organization and upon the
issuance of a charter by the Office of the Comptroller of the
Currency all shares of capital stock of the Bank will be
issued to the Company free and clear of any liens, claims, or
encumbrances of any kind, and the Bank will become a wholly
owned subsidiary of the Company.
(ii) The Company does not have any interest, directly
or indirectly, in any corporation, joint venture, partnership
or other entity other than the Bank.
(iii) As of the dates specified therein, the Company
had authorized and issued capital stock as set forth under the
caption
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<PAGE> 16
"Capitalization" in the Final Prospectus. All of the
outstanding Common Shares have been duly authorized and are
validly issued, fully paid and nonassessable, and the Shares
to be sold by the Company have been duly authorized, and upon
issuance thereof and payment therefor as provided herein, will
be validly issued, fully paid and nonassessable; none of the
issued shares have been issued in violation of or subject to
any preemptive rights provided for by law, agreement or the
Company's articles of incorporation or bylaws. To the
knowledge of such counsel, the Company does not have
outstanding any options to purchase, or any rights or warrants
to subscribe for, or any securities or obligations convertible
into, or any contracts or commitments to issue or sell any
capital stock, and there are no preemptive rights or other
rights to subscribe for or purchase any capital stock of the
Company, or any restriction upon the transfer of, the Shares
pursuant to the Company's articles of incorporation or bylaws
or any agreement or other instrument to which the Company is a
party or by which it may be bound, except as described in the
Effective Prospectus and Final Prospectus. Neither the filing
of the Registration Statement nor the offer or sale of the
Shares as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied,
for or relating to the registration of any Common Shares or
any other securities of the Company. The Underwriters will
receive valid title to the Shares to be issued and delivered
by the Company pursuant to this Agreement, free and clear of
all liens, encumbrances, claims, security interests,
restrictions, shareholders agreements and voting trusts
whatsoever. The capital stock of the Company and the Shares
conform in all material respects to the description thereof
contained in the Final Prospectus. All offers and sales of the
Company's securities prior to the date hereof were at all
relevant times duly registered or exempt from the registration
requirements of the Securities Act, were duly registered or
the subject of an exemption from the registration requirements
of applicable state securities or Blue Sky laws, and were
otherwise made in compliance with applicable law.
(iv) The form of share certificate used to evidence
the Common Shares is in due and proper form and complies with
all applicable legal requirements under the Georgia Business
Corporation Act.
(v) No consent, approval, authorization or order of
any court or federal or state governmental agency or body or
third party is required for the performance of this Agreement
by the Company or the consummation by the Company of the
transactions contemplated hereby, except such as have been
obtained under the Securities Act
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<PAGE> 17
and such as may be required by the NASD and under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the several Underwriters, as
to which such counsel need not express an opinion. The
performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated
hereby will not conflict with or result in a breach or
violation by the Company of any of the terms or provisions of,
or constitute a default by the Company under, any indenture,
mortgage, deed of trust, loan agreement, lease or other
agreement or instrument known to such counsel to which the
Company is a party or to which the Company or its properties
is subject, the articles of incorporation or bylaws of the
Company, any statute, or any judgment, decree, order, rule or
regulation of any court or governmental agency or body known
to such counsel to be applicable to the Company or its
properties.
(vi) The Company has full legal right, power and
authority to enter into this Agreement and to issue, sell and
deliver the Shares to be sold by it to the Underwriters as
provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes the
valid and legally binding obligation of the Company
enforceable against the Company in accordance with its terms,
subject to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent
conveyance, fraudulent transfer and other similar laws
relating to or affecting the rights of creditors.
(vii) The Company and the Bank have obtained or have
filed for all licenses, consents and approvals, and have
satisfied or have taken all action required at this time to
satisfy all eligibility and other similar requirements imposed
by federal and state regulatory bodies, administrative
agencies or other governmental bodies, agencies or officials,
in each case necessary for the conduct of the business in
which they are engaged or are contemplated to be engaged as
described in the Effective Prospectus and the Final Prospectus
(except where the failure to have any such licenses, consents,
and approvals, or to have satisfied or taken such action to
satisfy the requirements, individually or in the aggregate,
would not have a material adverse effect on the business,
properties, operations, or financial condition of the Company
or its subsidiaries, taken as a whole. With respect to any
necessary licenses, consents and approvals, and any necessary
eligibility and other similar requirements that the Company or
the Bank does not have at this time, (i) all applications
therefor are complete, accurate, and have been filed with the
appropriate regulatory authorities, and (ii) counsel knows of
no reason why the same will not be received or satisfied prior
to the time the same are
17
<PAGE> 18
required to conduct business as described in the Effective
Prospectus and the Final Prospectus.
(ix) Except as described in the Final Prospectus,
there is not pending or, to the knowledge of such counsel,
threatened any action, suit, proceeding, inquiry or
investigation, to which the Company or the Bank is a party, or
to which the property of the Company or the Bank is subject,
before or brought by any court or governmental agency or body.
(x) To the knowledge of such counsel, no default
exists, and no event has occurred which with notice or after
the lapse of time to cure or both, would constitute a default,
in the due performance and observance of any term, covenant or
condition of any material indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument known
to such counsel to which the Company or the Bank is a party or
to which properties are subject, or of the articles of
incorporation, articles of association, bylaws, or other
governing documents of the Company or the Bank.
(xi) To the knowledge of such counsel, neither the
Company nor the Bank is in violation of any law, ordinance,
administrative or governmental rule or regulation applicable
to the Company or the Bank, or any decree of any court or
governmental agency or body having jurisdiction over the
Company or the Bank except for violations which would not have
a material adverse effect on the Company or the Bank.
(xii) To the knowledge of such counsel, there are no
contracts or documents of the Company or the Bank which are
required to be filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations which
have not been so filed.
(xiii) The Company is not an "investment company" or
an entity "controlled" by an "investment company," as such
terms are defined in the Investment Company Act of 1940, as
amended.
(xiv) The Registration Statement and all
post-effective amendments thereto have become effective under
the Securities Act, and, to the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or, to the knowledge of such counsel, are
threatened, pending or contemplated by the Commission. All
filings required by Rule 424 and Rule 430A of the Rules and
Regulations have been made; the Registration Statement, the
Effective Prospectus and Final Prospectus, and any amendments
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<PAGE> 19
or supplements thereto (other than financial statements,
including notes, schedules, and other financial and
statistical data), as of their respective effective or issue
dates, complied as to form in all material respects with the
applicable requirements of the Securities Act and the Rules
and Regulations; the descriptions in the Registration
Statement, the Effective Prospectus and the Final Prospectus
of statutes, regulations, legal and governmental proceedings,
and contracts and other documents are accurate in all material
respects and present fairly in all material respects the
information required to be stated; and such counsel does not
know of any pending or threatened legal or governmental
proceedings, statutes or regulations required to be described
in the Final Prospectus which are not described as required
nor of any contracts or documents of a character required to
be described in the Registration Statement or the Final
Prospectus or to be filed as exhibits to the Registration
Statement which are not described and filed as required.
In addition to the matters set forth above, such opinion shall
also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that the
Registration Statement, the Effective Prospectus and the Final
Prospectus or any amendment or supplement thereto contains an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made
(except that such counsel need express no view as to financial
statements, schedules and other financial or statistical information
included therein).
The opinions to be rendered pursuant to paragraph (c) may be
limited to federal law, and as to foreign and state law matters, to the
laws of the states or jurisdictions in which such counsel is admitted
to practice.
(d) The Underwriters shall have received an opinion or
opinions, dated the Closing Date, of Waller Lansden Dortch & Davis,
PLLC, counsel for the Underwriters, with respect to the Registration
Statement and the Final Prospectus, and such other related matters as
the Underwriters may require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
(e) The Representative shall have received from Bricker &
Melton, P.A., a letter dated the date hereof and, at the Closing Date,
a second letter dated the Closing Date, in form and substance
satisfactory to the Representative, stating that they are independent
public accountants with respect to the Company within the meaning of
the Securities Act and the
19
<PAGE> 20
applicable Rules and Regulations, and containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information of the Company contained in the
Registration Statement and the Prospectus. In the event that the
letters to be delivered referred to above set forth any such changes,
decreases or increases, it shall be a further condition to the
obligations of the-Underwriters that the Underwriters shall have
determined, after discussions with officers of the Company responsible
for financial and accounting matters and with Bricker & Melton, P.A.,
that such changes, decreases or increases as are set forth in such
letters do not reflect a material adverse change in the total assets,
stockholders' equity or long-term debt of the Company registrant as
compared with the amounts shown in the latest balance sheets of the
Company included in the Final Prospectus, or a material adverse change
in revenues or net income of the Company, in each case as compared with
the corresponding period of the prior year.
(f) There shall have been furnished to the Representative a
certificate, dated the Closing Date and addressed to you, signed by the
President and Chief Financial Officer of the Company, to the effect
that:
(i) the representations and warranties of the Company
in Section 1 of this Agreement are true and correct, as if
made at and as of the Closing Date, and the Company has
complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings
for that purpose have been initiated or are pending, or to
their knowledge, threatened under the Securities Act;
(iii) all filings required by Rule 424 and Rule 430A of
the Rules and Regulations have been made;
(iv) they have carefully examined the Registration
Statement, the Effective Prospectus and the Final Prospectus,
and any amendments or supplements thereto, and such documents
do not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances under which they were made; and
(v) since the effective date of the Registration
Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration
Statement, the Effective Prospectus
20
<PAGE> 21
or the Final Prospectus which has not been so set forth.
(g) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Final Prospectus, and
except as stated therein, the Company has not sustained any material
loss or interference with its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or governmental
action, order or decree, or become a party to or the subject of any
litigation which is material and adverse to the Company, nor shall
there have been any material adverse change, or any development
involving a prospective material adverse change, in the business,
properties, key personnel, capitalization, prospects, net worth,
results of operations or condition (financial or other) of the Company,
which loss, interference, litigation or change, in the Representative's
reasonable judgment shall render it inadvisable to commence or continue
the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to proceed with the
delivery of the Shares.
(h) The Shares shall be approved for quotation on the OTCBB
system when issued.
(i) The Representative shall have received the Lockup
Agreements.
All such opinions, certificates, letters and documents delivered
pursuant to this Agreement will comply with the provisions hereof only if they
are reasonably satisfactory to the Representative and its counsel. The Company
shall furnish to the Representative such conformed copies of such opinions,
certificates, letters and documents in such quantities as the Representative
shall reasonably request.
The respective obligations of the Underwriters to purchase and pay for
the Option Shares shall be subject, in their discretion, to the conditions of
this Section 6, except that all references to the "Closing Date" shall be deemed
to refer to the Option Closing Date, if it shall be a date other than the
Closing Date.
7. Condition of the Company's Obligations. The obligation of the
Company to sell the Firm Shares is subject to the condition set forth in Section
6(a) hereof.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, against any losses, claims,
damages or liabilities to which such Underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as
such losses, claims,
21
<PAGE> 22
damages or liabilities (or actions in respect thereof) arise out of or
are based in whole or in part upon: (i) any inaccuracy in the
representations and warranties of the Company contained herein; (ii)
any failure of the Company to perform its obligations hereunder or
under law; (iii) any untrue statement or alleged untrue statement of
any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Effective Prospectus or Final Prospectus,
or any amendment or supplement thereto, (B) any audio or visual
materials supplied by the Company expressly for use in connection with
the marketing of the Shares, including without limitation, slides,
videos, films, computer files, and tape recordings (the "Marketing
Materials") or (C) in any Blue Sky application or other written
information prepared or executed by the Company filed in any state or
other jurisdiction in order to qualify any or all of the Shares under
the securities laws thereof (a "Blue Sky Application"); or (iv) the
omission or alleged omission to state in the Registration Statement,
any Preliminary Prospectus, the Effective Prospectus or Final
Prospectus or any amendment or supplement thereto, any Marketing
Materials or a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse each
Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, or liability arises
out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, the Preliminary Prospectus, the Effective Prospectus or
Final Prospectus, or any amendment or supplement thereto, or any
Marketing Materials or Blue Sky Application in reliance upon and in
conformity with written information relating to any Underwriter
furnished to the Company by any Underwriter specifically for use
therein; and, provided, further, that the foregoing indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such loss, claim,
damage or liability purchased Shares if a copy of the Final Prospectus
(or any Preliminary Prospectus as supplemented) was not sent or given
by or on behalf of such Underwriter to such person at or prior to the
written confirmation of the sale of such Shares to such person in any
case where such delivery is required by the Securities Act and the
Final Prospectus would have cured the defect giving rise to such loss,
claim, damage or liability.
(b) Each Underwriter will indemnify and hold harmless the
Company, each of its directors, each of the Company's officers who
signed the Registration Statement and each person, if any, who controls
the Company within the meaning of the Securities Act against any
losses, claims, damages or liabilities to which the Company or any such
director, officer or controlling
22
<PAGE> 23
person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Effective
Prospectus or Final Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission
to state in the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus or Final Prospectus, or any amendment or
supplement thereto, a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information relating to
any Underwriter furnished to the Company by any Underwriter
specifically for use therein; and will reimburse any legal or other
expenses reasonably incurred by the Company and each such controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, including
governmental proceedings, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 8 notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
hereunder except to the extent the indemnifying party hereunder has
been materially prejudiced thereby and in any event shall not relieve
it from liability otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party; and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation except that the indemnified
party shall have the right to employ separate counsel if, in the
indemnified party's reasonable judgment, it is advisable for the
indemnified party to be represented by separate counsel, and in that
event the fees and expenses of separate counsel shall be paid by the
indemnifying party.
23
<PAGE> 24
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding part of this Section 8 is for any reason held to be
unavailable to the Underwriters or the Company or is insufficient to
hold harmless an indemnified party, then the Company shall contribute
to the damages paid by the Underwriters, and the Underwriters shall
contribute to the damages paid by the Company; provided, however, that
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
The amount of such contribution shall (i) be in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, be in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other with
respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the
other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by
the Company, in the case of the Company, and the total underwriting
discounts and commissions received by the Underwriters with respect to
the Shares purchased under this Agreement, in the case of the
Underwriters, bear to the total gross proceeds from the offering of the
Shares under this Agreement, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity
for such purpose). Notwithstanding the foregoing, neither the Company,
nor any Underwriter or person controlling such Underwriter shall be
obligated to make contribution hereunder which in the aggregate exceeds
the underwriting discount applicable to the Shares purchased by such
party Underwriter under this Agreement, less the aggregate amount of
any damages which such Underwriter and its controlling persons have
otherwise been required to pay in respect of the same or any similar
claim. The Underwriters' obligations to contribute hereunder are
several in proportion to
24
<PAGE> 25
their respective obligations and not joint. For purposes of this
Section, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as such Underwriter, and each director of the Company,
each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, shall have the same rights to
contribution as the Company.
(e) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened action, suit or proceeding in respect of which any
indemnified party is a party or is (or would be, if a claim were to be
made against such indemnified party) entitled to indemnity hereunder,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
9. [INTENTIONALLY OMITTED]
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (a) any investigation made by or on behalf of
the Company, any of its officers or directors, any Underwriter or any
controlling person, (b) any termination of this Agreement and (c) delivery of
and payment for the Shares.
11. Effective Date. This Agreement shall become effective at
whichever of the following times shall first occur: (i) at 11:30 A.M.,
Washington, D.C. time, on the next full business day following the date on which
the Registration Statement becomes effective or (ii) at such time after the
Registration Statement has become effective as the Representative shall release
the Firm Shares for sale to the public; provided, however, that the provisions
of Sections 5, 8, 10 and 11 hereof shall at all times be effective. For purposes
of this Section 11, the Firm Shares shall be deemed to have been so released
upon the release by the Representative for publication, at any time after the
Registration Statement has become effective, of any newspaper advertisement
relating to the Firm Shares or upon the release by the Representative of
telegrams offering the Firm Shares for sale to securities dealers, whichever may
occur first.
12. Termination.
(a) The Company's obligations under this Agreement may be
terminated by the Company by notice to the Representative (i) at any
time before it becomes effective in accordance with Section 11 hereof,
or (ii) in the event that the condition set forth in Section 7 shall
not have been satisfied at or prior to the First Closing Date.
25
<PAGE> 26
(b) This Agreement may be terminated by the Representative by
notice to the Company (i) at any time before it becomes effective in
accordance with Section 11 hereof; (ii) in the event that at or prior
to the First Closing Date the Company shall have failed, refused or
been unable to perform any agreement on the part of the Company to be
performed hereunder or any other condition to the obligations of the
Underwriters hereunder is not fulfilled; (iii) if at or prior to the
Closing Date trading in securities on the NYSE, the American Stock
Exchange or the over-the-counter market shall have been suspended or
materially limited or minimum or maximum prices shall have been
established on either of such exchanges or such market, or a banking
moratorium shall have been declared by Federal or state authorities;
(iv) if at or prior to the Closing Date trading in securities of the
Company shall have been suspended; or (v) if there shall have been such
a material adverse change in general economic, political or financial
conditions or if the effect of international conditions on the
financial markets in the United States shall be such as, in your
reasonable judgment, makes it inadvisable to commence or continue the
offering of the Shares at the offering price to the public set forth on
the cover page of the Prospectus or to proceed with the delivery of the
Shares.
(c) Termination of this Agreement pursuant to this Section 12
shall be without liability of any party to any other party other than
as provided in Sections 5 and 8 hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to any of the Underwriters, shall be mailed or delivered or telegraphed
and confirmed in writing to the Representative in care of J.C. Bradford & Co.,
L.L.C., J.C. Bradford Financial Center, 330 Commerce Street, Nashville,
Tennessee 37201, Attention: Michael C. Nunan, or if sent to the Company shall be
mailed, delivered or telegraphed and confirmed in writing to the Company at 1303
Hightower Trail, Suite 130, Atlanta, Georgia 30350, Attention: H.N. Padget, Jr.
14. Miscellaneous. This Agreement shall inure to the benefit of
and be binding upon the several Underwriters, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Company and the several Underwriters and for
the benefit of no other person except that (a) the representations and
warranties and indemnities of the Company contained in this Agreement shall also
be for the benefit of any person or persons who control any Underwriter within
the meaning of Section 15 of the Securities Act, and (b) the indemnities by the
Underwriters shall also be for the benefit of the directors of the Company,
officers of the Company who have signed the Registration Statement and any
person or persons who control the
26
<PAGE> 27
Company within the meaning of Section 15 of the Securities Act. No purchaser of
Shares from any Underwriter will be deemed a successor because of such purchase.
The validity and interpretation of this Agreement shall be governed by the laws
of the State of Tennessee. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The Representative hereby
represents and warrants to the Company that it has authority to act hereunder on
behalf of the several Underwriters, and any action hereunder taken by the
Representative will be binding upon all the Underwriters.
If the foregoing is in accordance with your understanding of our
agreement, please indicate your acceptance thereof in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among the Company and each of the several Underwriters.
Very truly yours,
CNB HOLDINGS, INC.
By:
----------------------------
Title: President
-------------------------
Confirmed and accepted as of
the date first above written.
J.C. BRADFORD & CO., L.L.C.
For themselves and as
Representatives of the
Underwriters
By:
--------------------------
Partner
27
<PAGE> 28
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Firm Shares to
Underwriter Be Purchased
=========================
<S> <C>
J.C. Bradford & Co,, L.L.C.
=========================
Total.......................................... 900,000
=========================
</TABLE>
28
<PAGE> 1
EXHIBIT 4.1
[CNB HOLDINGS, INC. LOGO]
COMMON STOCK COMMON STOCK
NUMBER SHARES
CNB
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF GEORGIA CERTAIN DEFINITIONS
CUSIP 12812F 10 1
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
CNB Holdings, Inc. transferable in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are subject to the provisions of the Articles of
Incorporation, all amendments thereto, and the Bylaws of the Corporation, and to
the rights, preferences and voting powers of the Preferred Stock of the
Corporation now or hereafter outstanding; the terms of all such provisions,
rights, preferences and voting powers being incorporated herein by reference.
This certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal and the facsimile signatures of the duly authorized
officers of the Corporation.
Dated:
/s/ /s/
SECRETARY PRESIDENT AND CEO
CNB HOLDINGS, INC.
CORPORATE
SEAL
1997
GEORGIA
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
CNB HOLDINGS, INC.
CNB HOLDINGS, INC.'S AUTHORIZED CAPITAL STOCK INCLUDES PREFERRED STOCKS
WHICH, WHEN ISSUED, SHALL HAVE CERTAIN PREFERENCES OR SPECIAL RIGHTS IN THE
PAYMENT OF DIVIDENDS, IN VOTING, UPON LIQUIDATION, OR OTHERWISE. THE CORPORATION
WILL, UPON REQUEST, FURNISH TO ANY SHAREHOLDER WITHOUT CHARGE INFORMATION IN
WRITING AS TO THE NUMBER OF SUCH SHARES OF EACH CLASS OR SERIES OF SUCH
PREFERRED STOCKS AUTHORIZED AND OUTSTANDING AND A COPY OF THE PORTIONS OF THE
ARTICLES OF INCORPORATION OR RESOLUTIONS CONTAINING THE DESIGNATIONS,
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ALL SHARES AND ANY CLASS OR
SERIES THEREOF ANY SUCH REQUEST IS TO BE ADDRESSED TO THE TRANSFER AGENT NAMED
ON THE FACE OF THIS CERTIFICATE.
---------------
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED
THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
---------------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT-__________Custodian_____________
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------shares
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute
and appoint
- -----------------------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated_______________________________________
Signature
---------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OF ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
--------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SHOPPING CENTER FORM LEASE
THIS LEASE, is made and entered into as of this 24th day of March,
1998, between W.B. WIGGINS, JR., whose address is 3495 Piedmont Road, Building
11, Suite 400, Atlanta, Georgia 30305 (hereinafter referred to as "Landlord"),
and CNB Holdings, Inc. d/b/a CHATTAHOOCHEE NATIONAL BANK whose address is 7855
North Point Parkway, Suite 200, Alpharetta, Georgia 30022-4849 (hereinafter
referred to as "Tenant").
W I T N E S S E T H:
That, in consideration of the rents, covenants and conditions herein
set forth, Landlord and Tenant do hereby covenant, promise and agree as follows:
ARTICLE I
DEFINED TERM
1.1 The following terms wherever used herein shall have the
following meanings:
(a) DEMISED PREMISES: Tenant's building to be constructed
by Landlord at its expenses as specified in this
Lease on land described as Parcel A on Exhibit A
attached hereto, shall be 3,635 square feet of an
approximately 20,000 square foot one story building,
with the approximate dimensions and in the location
as shown outlined in red on the plat attached hereto
as Exhibit B.
(b) INITIAL TERM: FIVE (5) years, plus the part of a
month, if any, from the date of commencement of this
Lease to the first day of the first full calendar
month during the Initial Term.
(c) RENEWAL TERM: As specified in Paragraph 2.3 hereof.
(d) ANNUAL MINIMUM RENTAL: Tenant's payment of rent shall
commence on April 1, 1998. The base rental rate shall
be $18.00 per square foot, provided, however, that
for each Renewal Term, the Annual Minimum Rental
shall be adjusted as provided in Paragraph 2.3
hereof. In addition to the base rental rate, Tenant
shall pay a portion of the annual operating expense,
which shall be based on the Tenant's pro-rata share
of common area maintenance, taxes and insurance as
described in Article 16 of this Lease. Landlord
estimates that Tenant's contribution to annual
operating expenses in the first year will be
approximately Two and 75/100 Dollars ($2.75) per
square foot.
(e) COMMENCEMENT OF CONSTRUCTION DATE:
November 1, 1997.
(f) ESTIMATED COMPLETION DATE (Delivery for Tenant's
buildout and fixturing): March 31, 1998.
(g) DATE OF OCCUPANCY: April 1, 1998.
(h) PERMITTED USE: The Premises shall be used primarily
for the operation of a banking facility, engaging in
such activities as are normally permitted by O and I
zoning for the City of Alpharetta.
1
<PAGE> 2
(i) TENANT: The owner for the time being of the
leasehold/estate created by this Lease, whether it be
the original Tenant, or any assignee under a valid
assignment, and if at any time more than one
individual or firm comprises Tenant, such word shall
mean such individuals and firms, jointly and
severally.
(j) LANDLORD: The owner for the time being of the Demised
Premises, whether it be the original Landlord or any
successors-in-title, and if at any time more than one
individual or firm comprises Landlord, such word
shall mean such individuals and firms, jointly and
severally.
ARTICLE II
PREMISES AND TERM
2.1 Premises. Subject to the terms and conditions hereof, Landlord
does hereby demise unto Tenant and Tenant does hereby take from Landlord for the
lease term the Demised Premises, together with two twenty-eight (28) foot
driveway easements along the northern and western boundaries of Parcel A along
with reasonable access, ingress and egress, and rights to joint use of such
parking areas, driveways, sidewalks and other common areas as Landlord shall
provide from time to time on Parcel A, which rights shall be in common with
Landlord and other Tenants claiming under Landlord. Landlord hereby reserves the
right at any time to make alterations or additions to the Demised Premises so
long as such buildings are located in the area permitted for "Building" as shown
on Exhibit B and to construct other buildings or improvements in the development
of which the Demised Premises are a part and to make alterations thereof or
additions thereof. It is further understood between the parties, that from time
to time, Landlord may grant tenants and owners of parcels within the commercial
complex the use of the driveways for ingress and egress to such parcels and
right for sharing of utilities, storm drainage, and surface water drainage. Said
rights shall be superior to the rights of this Lease.
2.2 Initial Term. The Initial Term of this Lease shall commence
upon the Date of Occupancy; provided, however, the term of this Lease may be
extended as provided in Paragraph 2.3 hereof. The phrase "lease term," as used
in this Lease, shall be the Initial Term of this Lease and any Renewal Term.
2.3 Renewal Term. Tenant shall have the option to extend the term
of this Lease for Two (2) additional period(s) of Three (3) years (herein
referred to as the "Renewal Term"), said option(s) to be exercised by notice to
Landlord not less than Six (6) months prior to the expiration of the Initial
Term or existing renewal term hereof. All of the terms, covenants and provisions
of this Lease shall apply to the Renewal Term, except that the Annual Minimum
Rental for the Renewal Term(s) shall be increased annually, based upon the
"Consumer Price Index," not to be less than one and one-half percent (1-1/2%)
per year, or to exceed three percent (3%) per year (i.e., the Annual Minimum
Rental for the first year of the Renewal Term shall be calculated as follows =
Initial Term Annual Minimum Rental x CPI).
ARTICLE III
RENTAL
3.1 Annual Minimum Rental. Tenant shall, during the lease term pay
to Landlord, at such place as Landlord shall designate in writing from time to
time, the Annual Minimum Rental, unless abated or diminished as hereinafter
provided, in equal monthly installments on the first day of each month, in
advance, commencing upon the first day of the lease term; provided, however, in
the event the first day of the lease term shall not be the first day of a
calendar month, then the Annual Minimum Rental for such month shall be prorated
upon a daily basis and shall be payable upon the Date of Occupancy.
Notwithstanding anything contained herein to the contrary, upon completion of
Tenant's build out and opening for business, Tenant shall be entitled to waive
the next two (2) full month's guaranteed minimum monthly rental.
2
<PAGE> 3
3.2 Interest on Past Due Rentals. As additional rental hereunder,
Tenant agrees to pay to Landlord interest on each installment of Annual Minimum
Rental not paid by the tenth (10th) of the month. Each such payment of
additional rental shall be due on the first day of each month, shall be
calculated at twelve percent (12%) or less if the highest permissible rate of
interest which may be charged is less, and shall be computed for the period
commencing on the date on which such payment became due and ending on the date
on which such payment was actually made. The election by Landlord to collect
interest on any past due payments of Annual Minimum Rental shall not constitute
a waiver of Landlord's right to declare a default for non-payment of rental
hereunder. Failure of Tenant to make payments of additional rental when required
by this Paragraph 3.4 shall constitute an additional event of default hereunder.
ARTICLE IV
CONSTRUCTION
4.1 Construction of Improvements. Landlord, at its own cost,
agrees to construct the building in the location as shown on the plot plan
attached hereto as Exhibit B and in accordance with the plans and specifications
to be prepared by Landlord and its architects, and approved by both parties, as
attached hereto as Exhibit C. The parking lot is to be well lit at night for the
safety of Tenant's employees and customers, in accordance with the plans and
specifications provided for in Exhibit C. Any work in addition to any of the
terms specifically enumerated in said Exhibit C shall be performed by the Tenant
at its own cost and expense in accordance with plans and specifications to be
submitted to Landlord for its approval prior to construction, which approval
shall not be unreasonably withheld. Notwithstanding anything to the contrary,
Landlord shall provide an allowance for construction of the Tenant's buildout
and fixturing of $15.00 per rentable square foot below a semi-finished ceiling
(2x2 acoustical recessed grid ceiling system, stacked and ready for tenant to
install along with 40 2x4 deep cell parabolic lighting stacked and ready for
tenant to install), HVAC system consisting of four (4) three 3 ton units (not to
include ductwork), Electrical system to the 200 amp panel in the rear of the
space, and stubbing of the plumbing to the bathroom areas. Such allowance shall
be dispersed as follows: 1) the first half of the funds shall be dispersed upon
certification by Tenant that one-half (1/2) of the total cost of Tenant's work
has been completed and 2) the balance paid upon completion of Tenant's work and
a certificate of occupancy issued by the governing authority and Tenant shall
open for business. Tenant shall promptly pay and not under any circumstances
have the power to subject the Demised Premises or any part of the shopping
center to any mechanics' or materialmen's liens or liens of any kind.
Upon completion of Tenant's building substantially in
accordance with the terms of this Lease and delivery thereof to Tenant, Tenant
shall within ten (10) days thereafter execute and deliver to Landlord a written
acceptance of the Demised Premises. If at the time Landlord shall request a
written acceptance of the demised premises, there shall remain incompleted work
in accordance with the plans and specifications, then, provided that all other
terms and conditions of the lease have been met, Tenant shall execute the letter
of acceptance subject to an itemized list of any such construction deficiencies.
4.2 Time of Commencement and Completion of Construction. In the
event that construction of the building shall have commenced, then regardless of
the reason therefor, if said building and site improvements shall not have been
substantially completed ready for Tenant's buildout and fixturing and possession
thereof tendered to Tenant by March 31, 1998, herein after referred to as the
Estimated Completion Date, then, Tenant shall, within ten days (10) after said
Estimated Completion Dated, either (a) terminate this Lease by giving Landlord
written notice of its intention to do so, or (b) extend the estimated completion
date a reasonable period of time necessary to complete said construction by
giving Landlord written notice of such extension. Notwithstanding anything
contained herein to the contrary, in the event Tenant shall fail to exercise
either (a) or (b) above, in writing, or Landlord shall not have completed
construction of said building and site improvements within six months (6) after
the Estimated Completed Date, then either Landlord or Tenant, as the case may
be, shall have the option of terminating this Lease by giving the other party
written notice of its intention to do so. Upon any termination pursuant to this
Paragraph 4.2, this Lease shall immediately become null and void, and neither
party shall have any further liability hereunder, except for obligations already
accrued. The option to terminate granted hereby shall be the sole remedy of
Tenant for delay in completion by Landlord.
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Upon completion of Tenant's building substantially in accordance with
the terms of this Lease and delivery thereof to Tenant, Tenant shall within ten
days (10) thereafter execute and deliver to Landlord a written acceptance of the
Demised Premises. If at the time Landlord shall request a written acceptance of
the demised premises, there shall remain incompleted work in accordance with the
plans and specifications, then, provided that all other terms and conditions of
the lease have been met, Tenant shall execute the letter of acceptance subject
to an itemized list of any such construction deficiencies.
4.3 Inducement. It is understood between the Parties that Landlord
has entered into this agreement based upon Tenant's representation that prior to
April 7, 1998, Tenant shall have secured all the necessary permits for the
operation of a commercial bank on the demised premises and further, that Tenant
shall have completed the funding of approximately $10 million in equity
financing for the operation of such bank. If for any reason, the above required
inducements shall not have been completed by August 31, 1998, this Lease shall
automatically terminate and neither party shall have any further rights under
this Lease.
In the event Tenant shall have completed the above
requirements by August 31, 1998, then Tenant shall be required to commence
construction of Tenant's interior build-out no later than August 31, 1998,
failing which, Landlord shall have the right to terminate this Lease on ten (10)
days prior written notice.
ARTICLE V
WARRANTIES OF LANDLORD
5.1 Covenant of Title. Landlord covenants, represents and warrants
that it has full right and power to execute and perform this Lease and to grant
the estate demised herein and that Tenant, on payment of the rent and
performance of the covenants and agreements hereof, shall peaceably and quietly
have, hold and enjoy the Demised Premises and all rights granted herein during
the lease term without molestation or hindrance of any person claiming by,
through or under Landlord. If at any time during the term hereby demised the
title of Landlord shall fail or it be discovered that Landlord's title does not
permit Landlord to grant the term hereby demised, Tenant shall have the right to
annul and void this Lease or to exercise any and all further rights and remedies
which may be available to Tenant at law or in equity. Anything to the contrary
notwithstanding, prior to the exercise of any such remedy, Tenant shall give
Landlord thirty (30) days prior written notice of such default, in which time to
cure the default. In the event Landlord has commenced curing of the default
within such thirty (30) day period, however, has not been able to cure the
default, then Landlord shall be given an additional sixty (60) days within which
to cure such default.
ARTICLE VI
DATE OF OCCUPANCY AND USE
6.1 Advance Possession for Fixturing. Prior to completion of
improvements to be made by Landlord, Tenant shall have the right and privilege
(but at its own risk) to enter upon the Demised Premises, construct the agreed
upon Tenant improvements, to receive, store, and install its trade fixtures in
or on the Demised Premises, provided, however, that such construction and
receiving, storing, and installing shall be in a manner that will not interfere
with Landlord's work and that Tenant's liability insurance must be in full force
and effect. It is expressly agreed that such action by Tenant shall not
constitute acceptance of the Demised Premises as being completed as required
herein.
6.2 Use of Demised Premises. Tenant will use the Demised Premises
for the Permitted Use only and for no other purpose without the prior written
consent of Landlord. Tenant, at its sole expense, shall comply with all of the
requirements of all municipal, state and federal authorities now or hereafter in
force pertaining to the use, occupation or alteration of Demised Premises.
Tenant shall not commit waste or any nuisance. Tenant will not do any act or
thing in the Demised Premises or permit the storage of any product therein which
shall cause a cancellation of any of Landlord's insurance on the Demised
Premises. If any use of the Demised Premises by Tenant or act therein causes
Landlord's insurance rates to be increased over the rates in effect for the
Permitted Use
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generally, Tenant will, on demand, pay to Landlord the amount of any such
increase. Tenant further covenants that it will not (i) display any merchandise
or maintain any stands in front of the Demised Premises or of the line of
buildings in the center, (ii) erect or maintain any barricade or scaffolding
which may obscure the signs, entrance or show window of any other tenant in the
center, or tend to interfere with any such other tenant's business, (iii) create
or maintain, or allow others (including customers of Tenant) to create or
maintain, any nuisances, including, without limiting the foregoing general
language, loud noises, sound effects, offensive odors, and smoke, garbage,
trash, litter or dust in or about the Demised Premises or the common areas
adjacent to the Demised Premises, or (iv) install any equipment which will
exceed or overload the capacity of any utility facilities located in or serving
the Demised Premises.
ARTICLE VII
REPAIRS AND MAINTENANCE
7.1 Landlord's Repairs and Maintenance. Except as provided in this
Lease with respect to condemnation and damages caused by casualty, Landlord
agrees to keep, repair and maintain all structural parts of Tenant's building in
good condition, and without limiting the generality of the foregoing, to keep
the exterior of the building (including the roof, exterior walls, foundations,
gutters, downspouts, and sidewalk canopy), the common areas, sidewalks, paved
areas, supply pipes for gas (if any) and water, drainage and sewer pipes (caused
by structural defects, but excluding ordinary stoppage), electrical wiring (but
not any of the electrical or plumbing fixtures inside the Demised Premises) in
good repair at all times. If any portion of the Demised Premises which is the
responsibility of the Landlord shall at any time be in need of repair, Landlord
will promptly repair same upon receipt of written notice from Tenant to do so,
except that the Landlord shall not be obligated to make or pay for any repairs
to Tenant's store building rendered necessary by the fault, act or negligence of
Tenant, or any of its servants, agents, employees or business invitees, except
in the case of damage by fire or the elements, or other casualty covered by
Landlord's fire and extended coverage insurance. Landlord agrees to keep the
common areas clean, to remove snow and ice therefrom, to keep such areas lighted
during hours of darkness when stores generally are open for business, and to
keep the parking area properly paved, lighted and striped to assist in the
orderly parking of cars. Temporary closings by Landlord of parking, walking and
driveway areas for repairs, changes or other reasonable undertakings shall be
permitted.
7.2 Tenant's Repairs and Maintenance. Tenant agrees to keep the
Demised Premises in good condition and repair, excepting structural repairs and
all repairs which are the responsibility of the Landlord or which are made
necessary by reason of fire and other unavoidable casualties, and excepting
reasonable wear and tear. Within such repair responsibilities of Tenant shall be
included: the walls and ceiling (including the painting thereof); repair,
maintenance and replacement of air conditioning and heating systems; the
interior plumbing, including any stoppages thereof; sprinkler systems; all
windows and doors, both interior and exterior; replacement of any plate glass
damaged or broken; lighting fixtures and interior wiring extending to and
including the main circuit breaker panels; and the normal upkeep and replacement
of the floor surfacings or coverings. Tenant further agrees to pay the cost of
the heat and air conditioning, to apply for all utilities to be used by it in
the Demised Premises and pay all charges for such utilities, including, without
limitation, all water, gas, electricity and sewer charges. Structural changes,
exterior alterations or additions to the Demised Premises may be made only with
Landlord's written consent. Tenant will not permit any mechanic's or
materialmen's or other liens to stand against the Demised Premise for any labor
or material furnished Tenant in connection with alterations, repairs or work of
any character performed on the Demised Premises by or at the direction of
Tenant. All repairs, restorations, alterations, additions, or payments (other
than rental payments or monthly reimbursements) agreed upon in this Lease to be
made shall be completed within reasonable time. Tenant shall keep the area
around its loading dock free from trash and debris and shall provide for any
payment for trash removal from the Demised Premises.
7.3 Landlord's Access. Landlord shall at all reasonable times have
access to the Demised Premises for the purpose of inspecting the Demised
Premises to determine whether Tenant is complying with the terms and conditions
of this Lease and to determine whether Landlord needs to perform any work
hereunder and to perform any such work.
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7.4 Loss or Damage of Tenant and Others. Landlord shall not be
liable for any damage to property of Tenant or of others located o the Demised
Premises, not for the loss of or damage to any property of Tenant or of others
by theft or otherwise. Landlord shall not be liable for any injury or damage to
persons or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain or snow or leaks from any part of the Demised Premises
or from the pipes, appliances or plumbing works or from the roof, street or
subsurface or from any other place or by dampness or by any other cause of
whatsoever nature. Landlord shall not be liable for any such damage caused by
other tenants or persons in the Demised Premises, occupants of adjacent
property, of the shopping center, or the public, or caused by operations in
construction of any private, public or quasi-public work. All property of Tenant
kept or stored on the Demised Premises shall be so kept or stored at the risk of
Tenant only and the Tenant shall hold Landlord harmless from any claims arising
out of damage to the same, including subrogation claims by Tenant's insurance
carrier, unless such damage shall be caused by the willful act or gross neglect
of Landlord.
ARTICLE VIII
CASUALTY
8.1 Casualty Insurance. Landlord covenants and agrees that it will
at all times during the term of this Lease keep, or cause to be kept, Tenant's
building space on the Demised Premises insured by good and responsible insurance
companies authorized to do business in the state in which the Demised Premises
are located, which companies shall be acceptable to the holder of any mortgage
affecting the Demised Premises to which Landlord is a party, for protection
against damage or destruction by fire and other perils embraced within the term
"extended coverage" in an amount not less than one hundred percent (100%) of the
insurable value of the improvements above foundation walls. Landlord shall not
be liable for any damage to fixtures or merchandise of Tenant caused by fire or
other insurable hazards; Tenant does hereby expressly release Landlord of and
from all liability for such damages. Tenant shall not be liable for any damages
to the Demised Premises, or any part thereof, caused by fire or other hazards
covered by Landlord's insurance, regardless of the cause thereof, and Landlord
does hereby expressly release the Tenant of and from all liability for damages.
8.2 Reconstruction. Should less than fifty percent (50%) of the
cost of replacement of Tenant's building space on the Demised Premises be
destroyed by fire or any other casualty covered by a standard extended coverage
endorsement after the commencement of the Lease, Landlord shall promptly restore
the same or cause the same to be restored without unnecessary delay; provided,
however, that if the Demised Premises should be damaged to the extent of more
than fifty percent (50%) of the cost of replacement thereof, Landlord or Tenant
may elect to terminate this lease, within ninety (90) days thereafter, by giving
the other written notice of their intent to terminate, failing which, the lease
shall remain in full force and effect, and Landlord shall promptly restore the
same or cause the same to be restored without unnecessary delay.
During any period commencing upon the date of such damage or
destruction and ending upon the "date or reoccupancy of Tenant," the Annual
Minimum Rental and any other charges payable under this Lease (other than
Percentage Rental) shall abate in the proportion that the part of Tenant's
buildings which shall be untenantable shall bear to the whole. The term "date of
reoccupancy by Tenant," as used herein, shall be the first to occur of the
following two dates: (a) the date upon which Tenant shall reopen for business in
that part of Tenant's buildings rendered untenantable by such damage or
destruction, or (b) the date which shall be thirty (30) days after the date of
completion of the repairs, rebuilding and restoration required of Landlord
herein.
ARTICLE IX
EMINENT DOMAIN
9.1 Eminent Domain.
(a) In the event that all or substantially all of the
Demised Premises shall be appropriated or taken under the power of
eminent domain by any public or quasi-public authority, this Lease
shall
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terminate and expire as of the date of such taking, and Landlord and
Tenant shall thereupon be released from any further liability
hereunder. In the event as much as twenty percent (20%) of the Demised
Premises shall be appropriated or taken under the power of eminent
domain by any public of quasi-public authority, Tenant shall have the
right to cancel and terminate this Lease as of the date of such taking
upon giving Landlord written notice of such election within thirty (30)
days after the receipt by Tenant from Landlord of notice that said
premises have been so appropriated or taken. In the event of such
cancellation, Landlord and Tenant shall thereupon be released from any
further liability under this Lease and the Annual Minimum Rental for
the last month shall be appropriately prorated.
(b) If this Lease shall not be terminated as in this
paragraph provided but shall continue as to that portion of the Demised
Premises which shall not have been appropriated or taken, then in that
event Landlord, at its cost and expense, shall, as nearly as
practicable, immediately restore the building on the land remaining to
a complete unit of like quality and character as existed prior to such
appropriation or taking, and the Annual Minimum Rental shall
proportionately abate during the period of restoration as provided in
Paragraph 8.2 hereof, and thereafter the Annual Minimum Rental shall be
reduced in the ratio that the ground floor area of the Demised Premises
after such taking bears to the ground floor area of the Demised
Premises before such taking.
(c) In the event of any such taking, the entire award or
compensation whether as compensation for diminution in value to the
leasehold or to the fee of the Demised Premises shall be paid to and
belong to Landlord; provided, however, that any award made to Tenant
for moving expenses or for the value of any trade fixtures and
equipment installed by or belonging to Tenant shall be paid to and
belong to Tenant. Tenant at its sole election and expense may seek from
the condemning party and receive a separate award for business loss,
loss value of leasehold estate, and a value of leasehold improvements
incurred by or paid for by Tenant, so long as such separate claim does
not diminish the total value of the award made for the Premises and
Building.
ARTICLE X
DEFAULT
10.1 Remedies on Default. In the event (a) Tenant defaults in
Paying any rental payments hereunder, or (b) Tenant defaults for thirty (30)
days after written notice thereof in performing any other of its obligations
hereunder; or (c) Tenant is adjudicated a bankrupt; or (d) a permanent receiver
is appointed for Tenant's property, including Tenant's interest in the Demised
Premises and such receiver is not removed within sixty (60) days after written
notice from Landlord to Tenant to obtain such removal; or (e) whether
voluntarily or involuntarily, Tenant takes advantage of any debtor relief
proceedings under any present or future law, whereby the rent or any part
thereof is, or is proposed to be reduced or payment thereof deferred, and such
proceedings are not dismissed within sixty (60) days after notice from Landlord;
or (f) Tenant makes an assignment for benefit of creditors; or (g) the Demised
Premises or Tenant's effects or interest therein should be levied upon or
attached under process against Tenant, and not satisfied or dissolved within
sixty (60) days after the written notice from Landlord to Tenant to obtain
satisfaction thereof; or (h) Tenant vacates the Demised Premises or fails to
conduct its regular, routine business therein during normal business hours for a
period of more than thirty (30) days, then, and in any of said events,
notwithstanding any former waiver, Landlord shall have the option to do any of
the following (in addition to any not in limitation of any other remedy
permitted by law or by this Lease):
(1) Terminate this Lease, in which event Tenant shall
immediately surrender the Demised Premises to Landlord, but if Tenant
shall fail to do so, Landlord may, in accordance with applicable law,
without further notice and without prejudice to any other remedy
Landlord may have for possession or arrearages in rent, enter upon the
Demised Premises and expel or remove Tenant and its effects, by force
if necessary, without being liable to prosecution or any claim for
damages therefor. Landlord shall have any and all remedies allowed to
it under Georgia law, but shall not be entitled to terminate the Lease
and collect rent past the date of termination; or
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(2) Without terminating this Lease re-enter the Demised
Premises by summary proceedings or otherwise, and in any event may
dispossess the Tenant, removing all persons and property from the
Demised Premises and such property may be removed and stored in a
public warehouse or elsewhere at the cost of, and for the account of
Tenant, all without service of notice or resort to legal process and
without being deemed guilty of trespass, or becoming liable for any
loss or damage which may be occasioned thereby. In the event of such
re-entry, Landlord may relet the Demised Premises to such tenant or
tenants for such term or terms as Landlord may elect, without being
obligated to do so, and in the event of a reletting shall apply the
rent therefrom first to the payment of Landlord's expenses, including
attorney's fees incurred by reason of Tenant's default, and the expense
of reletting including but not limited to the repairs, renovation or
alteration of the Demised Premises, and then to the payment of rent and
all other sums due from Tenant hereunder, Tenant remaining liable for
any deficiency. Such deficiency shall be calculated and paid monthly.
No such re-entry or taking possession of the Demised Premises by
Landlord shall be construed as an election on his part to terminate
this Lease unless a written notice of such intention be given to Tenant
or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for
such previous breach. It is expressly understood between the parties,
that except as stated above, it is the intention of the parties that
Landlord may collect rent as each month's rent becomes due, but shall
not have any right to accelerate rent prior to termination.
(3) In addition, Landlord may, as agent of Tenant, do
whatever Tenant is obligated to do by the provisions of this Lease and
may enter the Demised Premises, without being liable to prosecution or
any claim for damages therefor, in order to accomplish this purpose.
Tenant agrees to reimburse Landlord immediately upon demand for any
expenses which Landlord may incur in this effecting compliance with
this Lease on behalf of Tenant, and Tenant further agrees that Landlord
shall not be liable for any damages resulting to the Tenant from such
action, unless caused by the negligence of Landlord.
ARTICLE XI
INDEMNIFICATION, LIABILITY AND OTHER INSURANCE
11.1 Demised Premises. Tenant agrees to indemnify and save harmless
Landlord from any claim or loss by reason of an accident or damage to person or
property happening on or about the Demised Premises, or occasioned wholly or in
part by and act or omission of Tenant or its agents, contractors, invitees,
licensees or employees. Tenant further agrees to carry, at its expense, public
liability insurance coverage on the Demised Premises, in a company qualified to
transact business in the state in which the Demised Premises are located,
stipulating limits of liability of not less than $250,000.00 for any accident
affecting any one person; and not less than $1,000,000.00 for any accident
affecting more than one person; and not less than $100,000.00 property damage.
All such policies shall contain endorsements waiving the insurer's rights of
subrogation against Landlord for any reason whatsoever. Certificates of such
coverage from the insurer providing thirty (30) days notice to Landlord prior to
cancellation or termination shall be furnished to Landlord.
11.2 Common Areas. Landlord shall indemnify and save harmless the
Tenant from any claim or less by reason of any accident or damage to any person
or property happening on or about all entranceways, parking and driveway areas
of the center and Landlord further agrees to carry public liability insurance
coverage on all such areas, in a company qualified to transact business in the
state in which the Demised Premises are located, stipulating limits of liability
of not less than $250,000.00 for an accident affecting any one person; and not
less than $1,000,000.00 for an accident affecting more than one person; and not
less then $1,000,000.00 property damage. Certificates of such coverage from the
insurer shall be furnished to Tenant upon written request.
11.3 Plate Glass and Sprinkler Insurance. Tenant, at its sole
expense, shall obtain and continuously maintain during the Initial Term and all
Renewal Terms hereof (1) a comprehensive glass insurance policy protecting all
plate and other glass in the Demised Premises and (ii) sprinkler and water
damage insurance. Landlord shall be a named insured under such policies and all
such insurance shall be placed in good and responsible companies acceptable to
Landlord. At commencement of the term hereof, certificates of such coverage from
the insurers providing thirty (30) days notice to Landlord prior to cancellation
or termination shall be furnished
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to Landlord. Loss, if any, under such policies shall be payable to Landlord, and
Landlord agrees that any policy proceeds received by it will be held in trust
and made available for repair or restoration of the damaged or destroyed
property. Tenant shall have the right to self-insure its obligations under this
paragraph 11.3.
ARTICLE XII
ASSIGNMENT, SUBLETTING AND RECAPTURE
12.1 Assignment and Subletting by Tenant. Tenant may not assign
this Lease, nor sublet the Demised Premises, nor permit the Demised Premises to
be occupied or used by third persons or entities, without the prior written
consent of landlord; provided, however, that such consent shall not be
unreasonably withheld and that even if Landlord shall consent to any such
assignment, Tenant shall remain liable and responsible under the Lease unless
Landlord specifically agrees otherwise. Notwithstanding the foregoing, in the
event Tenant shall desire to assign the Lease or sublet more than forty percent
(40%) of the Demised Premises, Tenant shall so notify Landlord in writing of its
intention prior to any such assignment or subletting. Landlord shall have
fifteen (15) days from receipt of such notice within which this Lease may be
terminated by written notice to Tenant, failing which, Tenant shall be entitled
to exercise its rights of assignment or sublet as provided for above in this
Article 12.1. The proposed assignee or sublessee or its business is subject to
compliance with additional requirements of the law commonly known as the
"Americans with Disabilities Act" beyond those requirements which are applicable
to the tenant desiring to assign or sublease.
12.2 Exclusives. For so long as Tenant is not in default hereunder,
and for so long as Tenant occupies and actively conducts its business from the
Demised Premises in accordance with the terms of this Lease, Landlord will not
lease or rent any other premises in the Office Center described in Exhibit A to
any new tenant whose primary business is the operation of a commercial banking
facility. Anything contained herein to the contrary notwithstanding, it is
expressly understood between the parties that Landlord intends to lease space in
the Office Center to a stock brokerage firm which has the right to carry on
activities as normally are carried on in such along with the right to include
residential and commercial mortgage loan activities. It is further understood
between the parties, that for so long as Harry Norman Realtors, its affiliates,
or assigns, are tenants in the 20,000 square foot office building, that the
Demised Premises shall not be operated by a Tenant whose primary business is the
operation of a residential real estate brokerage office.
12.3 Failure to Operate and Recapture. In the event (a) Tenant
shall cease to operate a business on the Demised Premises for the purpose herein
demised for a period in excess of sixty (60) days, and shall fail to notify
Landlord within said period of time in writing of intentions to reopen the
premises for such purpose within a reasonable time, or (b) Tenant shall notify
Landlord in writing of its intention to permanently close its business, then in
either event, Landlord shall have thirty (30) days within which the Lease may be
terminated by written notice to Tenant. After said thirty (30) day period, if
Landlord shall not so terminate this Lease, then Tenant be entitled to exercise
its rights of assignment and sublet as provided for above in Article 12.1.
12.4 Assignment by Landlord. Landlord may assign by way of security
or otherwise this Lease or any part hereof or any right hereunder without
Tenant's consent, and its entire rights under the Lease (other than a security
assignment) shall relieve Landlord of any further obligation hereunder, except
for obligations accrued at the time of such assignment, if the assignee assumes
and agrees to perform the obligations of the Landlord hereunder.
ARTICLE XIII
MORTGAGE SUBORDINATION
13.1 Agreement to Subordinate. This Lease shall be and hereby is
made subject and subordinate at all times to the lien or security title of any
mortgage granted by Landlord which may now or hereafter affect the real property
of which the Demised Premises forms a part, and to all renewals, modifications,
consolidations, participations, replacements and extensions thereof. While this
provision shall be self-executing, upon Landlord's written request, Tenant
agrees to execute and deliver, in recordable form, a separate written agreement,
satisfactory
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to the holder of any such mortgage, evidencing such subordination, provided,
however, Landlord shall use its reasonable efforts to provide a nondisturbance
agreement from Landlord's mortgagee acknowledging and agreeing to the terms
hereinafter specified in this Section 13.1. The term "mortgage" as used in this
Lease shall include deeds of trust and deeds to secure debt. Upon Tenant's
written request, Landlord will ask the holder of any mortgage affecting the
Demised Premises to agree, in writing, in recordable form, for itself, its
successors and assigns, that the rights of Tenant under the Lease shall not be
terminated, and the possession of Tenant shall not be disturbed by any mortgagee
or by any proceeding on the debt which any such mortgage secures, or by any
person, firm or corporation whose rights were acquired as a result of such
proceeding or by virtue of a right or power contained in any such mortgage or
the bond or note secured thereby and that any sale at foreclosure will be
subject to this Lease, subject however, to the conditions requested by such
mortgagee as a prerequisite to the execution of such agreement. Tenant agrees
that, in the event of foreclosure of any such mortgage or sale of the Demised
Premises under the power contained therein, Tenant will attorn to and accept the
purchaser at any such sale as Landlord for the balance of the then remaining
term of the Lease, subject to all of the terms and conditions.
13.2 Notice to Mortgagee. If Landlord shall notify Tenant of the
placing of any mortgage against the Demised Premises, Tenant agrees that in the
event of any act or omission by Landlord or any other occurrence which would
give Tenant the right to terminate this Lease, to claim a partial or total
eviction, or to reduce any rental payments hereunder, Tenant shall not exercise
any such right (a) until it has notified in writing the holder of any mortgage
which at the time shall be a lien on the Demised Premises and of which it has
notice, of such act or omission (b) until a reasonable period, not exceeding
thirty (30) days, for commencing the remedying of such act or omission shall
have lapsed following the giving of such notice, and (c) Landlord or such
holder, with reasonable diligence, shall not have so commenced and continued to
remedy such act or omission or cause the same to be remedied.
ARTICLE XIV
EXPIRATION OF TERM AND HOLDING OVER
14.1 Expiration. At the expiration or earlier termination of the
lease term Tenant shall surrender the Demised Premises, together with
alterations, additions, and improvements then a part thereof, in good order and
condition except for the following: ordinary wear and tear, repairs required to
be made by Landlord, and loss or damage by fire, the elements and other casualty
covered by insurance. All furniture and trade fixtures installed in the Demised
Premises at the expense of Tenant or other occupant shall remain the property of
Tenant or such other occupant and shall be removed by Tenant upon the
termination of the lease term.
14.2 Holding Over. In the absence of any written agreement to the
contrary, if Tenant should remain in occupancy of the Demised Premises after the
expiration of the lease term, it shall so remain as a tenant from month-to-month
and all provisions of this Lease applicable to such tenancy shall remain in full
force and effect.
ARTICLE XV
SIGNS
15.1 Signs. Landlord may erect and maintain such signs as it, in
its sole discretion, may deem appropriate to advertise the shopping center of
which the Demised Premises are a part. Tenant shall have the obligation to erect
and maintain a sign on the building forming a part of the Demised Premises
within thirty (30) days after the opening of its store. It is understood that
such sign shall be in harmony with the balance of the stores in the shopping
center and comply with the standard sign criteria attached as Exhibit D hereto.
Prior to erection of any sign permitted hereunder, Tenant shall submit to
Landlord a drawing of such proposed sign and obtain Landlord's approval thereto,
which approval shall not be unreasonably withheld. The cost of production,
installation and maintenance of the Tenant's sign shall be the sole
responsibility of the Tenant. Within nine (9) months following the Opening for
Business, Landlord may provide a monument sign at no cost to Tenant for the
Shopping Center. Is understood between the parties that a Hotel may be located
on the rear portion of Landlord's property and in such event such hotel user
will be entitled to a distinct and separate sign above the Landlord's
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monument sign. All such signs erected by Tenant shall comply with all the
requirements of public authorities having jurisdiction with respect thereto, and
Tenant will indemnify and save Landlord harmless from any claim or damage
arising from or related to the erection, maintenance or removal of such signs.
Landlord reserves the right to permit other tenants in the center to place
pylon-type or other signs, as Landlord deems fits, in the common area.
ARTICLE XVI
TAXES, OPERATING EXPENSES AND INSURANCE
16.1 Reimbursement for Ad Valorem Taxes. In addition to rentals
provided for in Article III hereof, Tenant shall pay to Landlord as additional
rental "Tenant's pro rata share" of all ad valorem taxes on the building and
land of which the Demised Premises are a part, and all improvements now or
hereafter located thereon. For these purposes, "Tenant's pro rata share" of such
taxes shall be that percentage which is determined by dividing the number of
square feet of gross space in all buildings in the center into the number of
square feet of gross space in the Demised Premises. Tenant agrees to pay to
Landlord on the first (1st) day of each calendar month such amounts as Landlord
estimates from time to time as necessary to pay Tenant's pro rata share of such
taxes. Landlord shall bill Tenant annually, after the end of each calendar year
for Tenant's pro rata share of such taxes, which bill shall set forth the method
of calculation of such pro rata share. In the event that Tenant's actual pro
rata share, as computed above, exceeds the aggregate amount paid by Tenant in
the preceding year pursuant to this paragraph, Tenant shall, with the next
installment of Annual Minimum Rental becoming due, pay such deficiency to
Landlord. In the event that the aggregate amount paid by Tenant in the preceding
year shall exceed Tenant's pro rata share of such costs for such year, Landlord
shall pay such excess to Tenant at the time such bill is submitted to Tenant.
16.2 Reimbursement for Maintenance of Common Areas. In addition to
the rentals provided for in Article III hereof, Tenant shall pay to Landlord as
additional rent, "Tenant's pro rata share" of the cost of maintaining the common
areas of the center of which the Demised Premises are a part. For these
purposes, "Tenant's pro rata share" of such costs shall be that percentage which
is determined by dividing the number of square feet of gross space in all
buildings in the center into the number of square feet of gross space in the
Demised Premises; and the "cost of maintaining the common areas of the center"
shall include all reasonable expenses incurred by Landlord (including, as an
expense, amounts determined as reasonable in appropriate reserves for the
replacement of equipment not capital in nature) in operating, managing,
equipping and policing the common areas, including, without limiting the
generality of the foregoing, all costs incurred as a result of Landlord's
obligation with respect to common area maintenance set forth in Paragraph 7.1
above, provided said costs shall not include items of a capital nature. Tenant
agrees to pay to Landlord on the first (1st) day of each calendar month such
amounts as Landlord estimates from time to time as necessary to pay Tenant's pro
rata share of such costs. On or before the first (1st) day of June of each year,
Landlord shall deliver to Tenant a statement, certified by the individual in the
employee of Landlord who is primarily responsible for the financial affairs
involving the center, of the actual costs incurred in maintaining said common
areas for the immediately preceding calendar year, together with a computation
of Tenant's pro rata share of such costs. In the event that Tenant's actual pro
rata share, as computed above, exceeds the aggregate amount paid by Tenant in
the preceding year pursuant to this paragraph, Tenant shall, with the next
installment of Annual Minimum Rental becoming due, pay such deficiency to
Landlord. In the event that the aggregate amount paid by Tenant in the preceding
year shall exceed Tenant's pro rata share of such costs for such year, Landlord
shall pay such excess to Tenant at the time such statement is submitted to
Tenant.
16.3 Reimbursement for Casualty and Public Liability Insurance. In
addition to the rentals provided for in Article III hereof, Tenant shall pay to
Landlord as additional rent, "Tenant's pro rata share" of the cost of
maintaining casualty and public liability insurance covering the center of which
the Demised Premises are a part. For these purposes, "Tenant's pro rata share"
of such costs shall be that percentage which is determined by dividing the
number of square feet of gross space in all buildings in the center covered by
the insurance policies maintained by Landlord into the number of square feet of
gross space in the Demised Premises; and the cost of maintaining casualty and
public liability insurance covering the center shall include all costs incurred
by Landlord as a result of Landlord's obligation with respect to casualty
insurance set forth in Paragraph 8.1 above, and with respect to public liability
insurance set forth in Paragraph 11.2 above, respectively. Tenant agrees to pay
to Landlord on the first (1st) day of each calendar month such amounts as
Landlord estimates from time to time as necessary to pay Tenant's pro rata share
of such costs. On or before the first (1st) day of June of each year, Landlord
shall deliver to Tenant a
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statement, certified by the individual in the employ of Landlord who is
primarily responsible for the financial affairs involving the center, of the
actual costs incurred in maintaining said casualty and public liability
insurance for the immediately preceding calendar year, together with a
computation of Tenant's pro rata share of such costs. In the event that Tenant's
actual pro rata share, as computed above, exceeds the aggregate amount paid by
Tenant in the preceding year pursuant to this paragraph, Tenant shall, with the
next installment of Annual Minimum Rental becoming due, pay such deficiency to
Landlord. In the event that the aggregate amount paid by Tenant in the preceding
year shall exceed Tenant's pro rata share of such costs for such year, Landlord
shall pay such excess to Tenant at the time such statement is submitted to
Tenant.
16.4 Tenant's Right to Review Books. Tenant shall have the right to
audit Landlord's record of expenditures referred to in paragraphs 16.1, 16.2 and
16,3, provided such audit shall be at Tenant's sole cost and expense.
ARTICLE XVII
MISCELLANEOUS
17.1 Notices. All notices, elections, demands, requests and other
communications hereunder shall be in writing, signed by the party making the
same and shall be sent by certified or registered United States mail, postage
prepaid, addressed:
To Landlord:
W.B. Wiggins, Jr.
c/o Wiggins Associates
3495 Piedmont Road
Building 11, Suite 400
Atlanta, Georgia 30305
To Tenant: Chattahoochee National Bank
7855 North Point Parkway
Suite 200
Alpharetta, Georgia 30022-4849
or at such other address as may hereafter be designated in writing by either
party hereto. The time and date on which mail is postmarked shall be the time
and date on which such communication is deemed to have been given.
17.2 Brokerage. Landlord shall indemnify and hold harmless Tenant
against and in respect of any and all claims, losses, liabilities and expenses
which may be asserted against Tenant by any broker or other person on the basis
of any arrangements or agreements made or alleged to have been made by or on
behalf of Landlord in respect of the transactions herein contemplated. Tenant
shall indemnify and hold harmless Landlord against and in respect of any and all
claims, losses, liabilities and expenses which may be asserted against Landlord
by any broker or other person on the basis of any arrangements or agreements
made or alleged to have been made by or on behalf of Tenant in respect of the
transactions herein contemplated. Landlord acknowledges that Heritage Commercial
Realty, Inc. has acted as agent for the Tenant in this transaction and not as
the agent of the Landlord. Landlord shall pay the brokerage commission to
Heritage Commercial Realty, Inc. in accordance with a separate agreement.
17.3 Equitable Remedies. Except as specifically otherwise provided,
the parties agree that their obligations hereunder shall be enforceable by
specific performance, and that Landlord and Tenant shall be entitled to
restraint by injunction of the violation or attempted or threatened violation of
any of the terms, covenants, conditions, provisions or agreements of this Lease.
Except where stated to be exclusive or sole, the specified remedies to which the
parties may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which
either party may be lawfully entitled in case of any breach or threatened breach
of any provision of this Lease.
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17.4 No Waiver. The failure by either party to insist in any one or
more cases upon the strict performance of any of the terms, covenants,
conditions, provisions or agreements of this Lease shall not be construed as a
waiver or a relinquishment for the future of any such term, covenant, condition,
provision or agreement.
17.5 Entire Agreement. This lease and any written amendments
thereof contains the entire agreement between the parties hereto, and no
promises, agreements, conditions or stipulations not contained herein shall be
binding upon either party hereto.
17.6 (a) Landlord's Right to Cure. In the event Tenant should
fail to perform any of its obligations hereunder, in addition to any other
remedies provided hereunder or by law, Landlord shall have the right, at its
option, to perform such obligations on behalf of Tenant at any time following
ten (10) days' prior written notice to Tenant (except in cases of emergency when
no notice shall be required). In such event, Tenant shall pay the Landlord, as
additional rental hereunder, all costs and expenses so incurred by Landlord
including reasonable attorney's fees upon demand. All such amounts shall bear
interest at the rate of eight percent (8%) from the date such amounts are
incurred until paid.
(b) Tenant's Right to Cure. In the event that Landlord
shall fail to perform any of its obligations hereunder, (including making
repairs), it is required to make and provide services it is required to provide,
pursuant to the terms of this Lease, after having been duly notified by Tenant
in writing sent by certified mail and given thirty (30) days within which to
commence and substantially perform said repairs or replacements or provide said
services, then Tenant shall have the right to make such repairs or provide such
services and to deduct the cost thereof and expenses so incurred in connection
therewith from future accruing rents hereunder, or may otherwise recover the
same from Landlord.
17.7 Captions. The captions and headings throughout this Lease are
for convenience and reference only, and the words contained therein shall in no
way be held or deemed to define, limit, describe, explain, modify, amplify or
add to the interpretation, construction or meaning of any provision of or the
scope or intent of this Lease, nor in any way affect this Lease.
17.8 Successors and Assigns. This Lease, and each and every
provision hereof, shall be binding upon and shall inure to the benefit of
Landlord and Tenant, their respective successors, successors-in-title, legal
representatives, heirs and assigns, to execute any instruments which may be
necessary or appropriate to carry out and execute the purposes and intentions of
this Lease, and hereby authorizes and directs its successors,
successors-in-title, legal representatives, heirs and assigns, to execute all
such instruments. Each and every successor in interest to any part hereto,
whether such successor acquires such interest by way of gift, purchase,
foreclosure, or by any other method, shall hold such interest subject to all of
the terms and provisions of this Lease.
17.9 Severability. In the event any provision of this Lease is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of any other provision hereof.
17.10 Modification. No change or modification of this Lease shall be
valid or binding upon the parties hereto unless such change or modification
shall be in writing and signed by the party against whom the same is sought to
be enforced.
17.11 Status of Lease. Landlord and Tenant each agree to certify in
writing the status of this Lease and the rental payable hereunder, at any time,
upon ten (10) days' written notice. Such certificate shall be in a form
reasonably satisfactory to any governmental authority or public agency or to a
prospective purchaser from, or assignee or sublessee of, or holder of a security
instrument executed by Landlord or Tenant, as the case may be. In addition to
any other matters required, such certificate shall certify the commencement date
of the lease term and the anticipated termination date thereof, whether or not
this Lease is in full force and effect; whether or not this Lease has been
amended or modified, and if so, in what manner; the date through which rental
payments have been made; whether or not there are any known defaults under this
Lease, and if so, specifying the particulars of such default and the action
required to remedy it; and whether or not there are any set-offs against or
defenses to the enforcement of the terms and conditions of this Lease, and if
so, specifying the particulars of such set-offs or defenses.
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17.12 Short Form. Landlord and Tenant agree, upon the request of the
other, to execute and deliver a short form or memorandum of this Lease for
recording purposes.
17.13 Delay. If Landlord or Tenant is delayed or prevented from
performing any of its obligations under this Lease by reason of strike or labor
troubles or any outside cause whatsoever beyond Landlord's or Tenant's
reasonable control, the period of such delay or such prevention shall be deemed
added to the time herein provided for the performance of any such obligations by
Landlord or Tenant.
17.14 Applicable Law. This Lease shall be governed by and construed
in accordance with the laws of the State of Georgia.
17.15 Rules and Regulations. The rules and regulations, if any,
appended to this Lease are hereby made a part of this Lease, and Tenant agrees
to comply with and observe the same. Tenant's failure to keep and observe said
rules and regulations shall constitute a breach of the terms of this Lease in
the manner as if the same were contained herein as covenants. Landlord reserves
the right from time to time to amend or supplement said rules and regulations,
if any, or (if none are appended) to make rules and regulations, and to adopt
and promulgate additional rules and regulations applicable to the Demised
Premises and the shopping center. Notice of such additional rules and
regulations, and amendments and supplements, if any, shall be given to Tenant,
and Tenant agrees thereupon to comply with and observe all such rules and
regulations, and amendments thereto.
17.16 Rider. Intentionally Deleted.
17.17 Exculpation. Tenant agrees that Tenant shall look solely to
Landlord's interest in the shopping center property of which the Demised
Premises are a part and Landlord's personal property used in connection
therewith for the satisfaction of any claim, judgment or decree requiring the
payment of money by Landlord based on any default hereunder, and no other
property or assets of Landlord, its affiliates, successors, partners,
shareholders, subsidiaries, or assigns, shall be subject to levy, execution or
other enforcement procedures for the satisfaction of any such claim, judgment,
injunction or decree.
17.18 Parking Stipulations. Landlord and Tenant agree that Tenant
designate three (3) parking spaces in an area immediately to the front of
Tenant's demised premises which Tenant may at its own expense paint the
designation "Reserve Chattahoochee." Landlord shall likewise have the right to
designate Reserve Parking for other Tenants in the Office Center, provided such
spaces should not exceed one (1) space per 1,000 square feet of lease space.
Other than as stated above, the Parties understand and agree that the other
spaces in the Office Center shall be used in common with other tenants located
in the Office Center.
17.19 Hazardous Materials. The Landlord has made sufficient inquiry
as to the presence of any hazardous or toxic materials on the property. Under no
circumstances shall Tenant have any responsibility, liability or any
indemnification duty for any hazardous materials on the property, unless
directly placed on the Premises by Tenant. Landlord and Tenant shall each
indemnify and hold harmless the other for liability and damages proximately
caused by acts of negligence of the other in accordance with the provisions of
Georgia law.
17.20 Attorney's Fees. Should Landlord fail to perform any of its
covenants under this Lease, Tenant shall be entitled to recover, in addition to
any and all other remedies provided under Georgia law, (a) attorneys fees equal
to the gross or full amount of such attorneys fees and all expenses in
connection therewith, or fifteen percent (15%) aggregate amount to be collected
by or to any attorney at law, and (b) interest at the rate of eighteen percent
(18%) per annum aggregate amounts ought to be collected.
Should Tenant fail to perform any of its covenants under this Lease,
Tenant shall be entitled to recover, in addition to any and all other remedies
provided under Georgia law, (a) attorneys fees equal to the gross or full amount
of such attorneys fees and all expenses in connection therewith, or fifteen
percent (15%) aggregate amount to be collected by or to any attorney at law, and
(b) interest at the rage of eighteen percent (18%) per annum aggregate amounts
ought to be collected.
17.21 Consent of Landlord and Tenant. Wherever and whenever in this
Lease any written consent or prior consent of the Landlord is required, such
written consent or prior written consent shall not be unreasonably
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withheld. Wherever and whenever in this Lease any written consent or prior
consent of the Tenant is required, such written consent or prior written consent
shall not be unreasonably withheld.
17.22 Cancellation Provision. The Lease shall contain a provision
whereby Tenant may cancel the Lease at any time after the 18th month on the
Lease by giving Landlord ninety (90) days written notice, and by paying four (4)
months' extra rent and the unamortized portion of Landlord's contribution to
Tenant's Improvements ($15.00 per square foot) based on a sixty (60) month term
commencing from the date of April 1, 1998. The four (4) month rental amount
shall decline on a prorata basis over the period of the remaining thirty-six
(36) months.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed under seal the day and year first above written.
WITNESSES: LANDLORD: W.B. WIGGINS, JR.
/s/ By: /s/ W. B. Wiggins, Jr.
- ---------------------------- --------------------------------------
Its:
- ---------------------------- --------------------------------------
WITNESSES: TENANT: CNB HOLDINGS, INC. d/b/a
CHATTAHOOCHEE NATIONAL
BANK
/s/ By: /s/ H.N. Padget, Jr.
- ---------------------------- --------------------------------------
Its: President and Chief Executive Officer
- ---------------------------- --------------------------------------
Attest: /s/ Valerie A. Donnell
- ---------------------------- -----------------------------------
Its: Chief Financial Officer
- ---------------------------- --------------------------------------
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into as of
November 1, 1997 by and between H. N. Padget, Jr., a resident of the State of
Georgia ("Employee") and CNB Holdings, Inc., a Georgia bank holding company and
Chattahoochee National Bank, CNB's wholly owned subsidiary (collectively "CNB").
W I T N E S S E T H:
WHEREAS, CNB and Employee each desire to enter into, or continue, an
employment relationship with the other; and
WHEREAS, CNB and Employee each deem it necessary and desirable, for
their mutual protection, to execute a written document setting forth the terms
and conditions of said relationship;
NOW, THEREFORE, in consideration of the employment of Employee by CNB,
of the premises and the mutual promises and covenants contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Employment and Duties. CNB hereby employs Employee to serve as
President and Chief Executive Officer and to perform such duties and
responsibilities as customarily performed by persons acting in such capacity.
During the terms of this Agreement, Employee will devote his full time and
effort to his duties hereunder.
2. Term. The period of Employee's employment under this Agreement shall
be deemed to have commenced as of the date of receipt of the opening letter from
its primary regulator, and shall continue for a period of thirty-six (36)
calendar months thereafter, unless (i) the Employee dies before the end of such
thirty-six (36) months, or (ii) CNB is not successful in obtaining a charter or
an opening letter from the Office of the Comptroller of the Currency or the
Federal Deposit Insurance Corporation, in either case the period of employment
shall continue until the earlier of the end of the month of such death or the
denial of charter or opening occurs.
3. Compensation. For all services to be rendered by Employee during the
term of this Agreement, CNB agrees to pay Employee in accordance with the terms
outlined in Exhibit A net of applicable withholdings.
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4. Expenses. So long as Employee is employed hereunder, Employee is
entitled to receive reimbursement for, or seek payment directly by CNB of, all
reasonable expenses which are consistent with the normal policy of CNB in the
performance of Employee's duties hereunder, provided that Employee accounts for
such expenses in writing.
5. Employee Benefits. So long as Employee is actively employed
hereunder, Employee will be entitled to participate in the employee benefit
programs covering the Employee's employment and duties as described in Exhibit A
of this Agreement, if any, provided and paid for by CNB for its employees
generally.
6. Vacation. Employee shall be entitled to a vacation in accordance
with CNB's vacation policy in effect at the time the vacation is to be taken.
7. Confidentiality. In Employee's position as an employee of CNB,
Employee has had and will have access to confidential information, trade secrets
and other proprietary information of vital importance to CNB and has and will
also develop relationships with customers, employees and others who deal with
CNB which are of value to CNB. CNB requires as a condition to Employee's
employment with CNB that Employee agrees to certain restrictions on Employee's
use of the proprietary information and valuable relationships developed during
Employee's employment with CNB. In consideration of the terms and conditions
contained herein, the parties hereby agree as follows:
7.1 CNB and Employee mutually agree and acknowledge that CNB
may entrust Employee with highly sensitive confidential, restricted and
proprietary information concerning various Business Opportunities (as
hereinafter defined), customer lists, and personnel matters. Employee
acknowledges that he shall bear a fiduciary responsibility to CNB to protect
such information from use or disclosure that is not necessary for the
performance of Employee's duties hereunder, as an essential incident of
Employee's employment with CNB.
7.2 For the purposes of this Section, the following
definitions shall apply:
7.2.1 "TRADE SECRET" shall mean the identity of customers of
CNB, the whole or any portion or phase of any scientific or technical
information, design, process, procedure, formula or improvement that is valuable
and secret (in the sense that it is not generally known to competitors of CNB)
and which is defined as a "trade secret" under Georgia law pursuant to the
Georgia Trade Secrets Act.
7.2.2 "CONFIDENTIAL INFORMATION" shall mean any data or
information, other than Trade Secrets, which is material to CNB and not
generally known by the public. Confidential Information shall include,
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but not be limited to, Business Opportunities of CNB (as hereinafter defined),
the details of this Agreement, CNB's business plans and financial statements and
projections, and the costs of the services CNB may offer or provide to the
customers they serves, to the extent such information is material to CNB and not
generally known by the public.
7.2.3 "BUSINESS OPPORTUNITIES" shall mean any specialized
information or plans of CNB concerning the provision of financial services to
the public, together with all related information concerning the specifics of
any contemplated financial services regardless of whether CNB has contacted or
communicated with such target person or business.
7.2.4 Notwithstanding the definitions of Trade Secrets,
Confidential Information, and Business Opportunities set forth above, Trade
Secrets, Confidential Information, and Business Opportunities shall not include
any information:
(i) that is or becomes generally known to the
public;
(ii) that is already known by Employee or
is developed by Employee after termination of employment through entirely
independent efforts;
(iii) that Employee obtains from an independent
source having a bona fide right to use and disclose such information;
(iv) that is required to be disclosed by law,
except to the extent eligible for special treatment under an appropriate
protective order; or
(v) that CNB's Board of Directors approves for
release.
7.3 Employee shall not, without the prior approval of
NB's Board, during his employment with CNB and for so long thereafter as the
information or data remain Trade Secrets, use or disclose, or negligently permit
any unauthorized person who is not an employee of CNB to use, disclose, or gain
access to, any Trade Secrets of CNB, its subsidiaries or affiliates, or of any
other person or entity making Trade Secret's available for CNB's use.
7.4 Employee shall not, without the prior written consent
of CNB, during his employment with CNB and for a period of two (2) years
thereafter as long as the information or data remain competitively sensitive,
use or disclose, or negligently permit any unauthorized person who is not
employed by CNB to use, disclose, or gain access to, any Confidential
Information to which the Employee obtained access by virtue of his employment
with CNB, except as provided in Section 7.2 of this Agreement.
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8. Observance of Security Measures. During Employee's employment with
CNB, Employee is required to observe all security measures adopted to protect
Trade Secrets, Confidential Information, and Business Opportunity of CNB.
9. Return of Materials. Upon the request of CNB and, in any event, upon
the termination of his employment with CNB, Employee shall deliver to CNB all
memoranda, notes, records, manuals or other documents, including all copies of
such materials, pertaining to the performance of Employee's services hereunder
or containing Trade Secrets or Confidential Information, whether made or
compiled by Employee or furnished to him from any source by virtue of his
employment with CNB.
10. Severability. Employee acknowledges and agrees that the covenants
contained in Sections 7 through 9 of this Agreement shall be construed as
covenants independent of one another and distinct from the remaining terms and
conditions of this Agreement, and severable from every other contract and course
of business between CNB and Employee, and that the existence of any claim, suit
or action by Employee against CNB, whether predicated upon this or any other
agreement, shall not constitute a defense to CNB's enforcement of any covenant
contained in Sections 7 through 9 of this Agreement.
11. Specific Performance. Employee acknowledges and agrees that the
covenants contained in Sections 7 through 9 of this Agreement shall survive any
termination of employment, as applicable, with or without Cause, at the
instigation or upon the initiative of either party. Employee further
acknowledges and agrees that the ascertainment of damages in the event of
Employee's breach of any covenant contained in Sections 7 through 9 of this
Agreement would be difficult, if at all possible. Employee therefore
acknowledges and agrees that CNB shall be entitled in addition to and not in
limitation of any other rights, remedies, or damages available to CNB in
arbitration, at law or in equity, upon submitting whatever affidavit the law may
require, and posting any necessary bond, to have a court of competent
jurisdiction enjoin Employee from committing any such breach.
12. Termination. During the term of this Agreement, employment,
including without limitation, all compensation, salary, expenses, reimbursement,
and employee benefits may be terminated as follows:
12.1 At the election of CNB for Cause;
12.2 At Employee's election, upon CNB's breach of any
material provision of this Agreement;
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12.3 "Cause" shall mean (i) conduct by Employee that
amounts to fraud, dishonesty, gross negligence or willful misconduct in the
performance of his duties hereunder; (ii) the conviction (from which no appeal
may be, or is, timely taken) of Employee of a felony; or (iii) initiation of
suspension or removal proceedings against Employee by federal or state
regulatory authorities acting under lawful authority pursuant to provisions of
federal or state law or regulation which may be in effect from time to time. No
termination for Cause shall be effective unless it is approved by a two-thirds
(2/3) vote of CNB's Board of Directors, excluding the vote, if any, of Employee;
or
12.4 Upon Employee's death, or at the election of either
party, upon Employee's disability resulting in inability to perform the duties
described in Section 1 of this Agreement for a period of ninety (90) consecutive
days as determined by CNB's Board of Directors in its sole discretion.
13. Notice. All notice provided for herein shall be in writing and
shall be deemed to be given when delivered in person or deposited in the United
States Mail, registered or certified, return receipt requested, with proper
postage prepaid and addressed as follows:
CNB: CNB Holdings, Inc.
9755 Dogwood Road, Suite 310
Roswell, Georgia 30075
Attn: Chairman
with a copy to: Troutman Sanders LLP
600 Peachtree Street, Suite 5200
Atlanta, Georgia 30308-2216
Attn: Thomas O. Powell, Esquire
Employee: H. N. Padget, Jr.
170 Willow Way
Roswell, Georgia 30076
with a copy to: Ruff & Associates
2727 Paces Ferry Road
One Paces West, Suite 275
Atlanta, Georgia 30339
Attn: Larry L. Ruff, Esquire
14. Covenant Not to Compete.
14.1 For purposes of this Section 14, CNB and Employee
conduct the following business in the following territories:
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<PAGE> 6
14.1.1 CNB is engaged in the business of
transacting business as a bank holding company with subsidiary banks which
accept deposits, make loans, cash checks and otherwise engage in the business of
banking ("Business of CNB").
14.1.2 CNB (through its subsidiaries) actively
conducts business in the geographic areas of Georgia at the business locations
of CNB's subsidiaries set forth in Exhibit B of this Agreement.
14.1.3 Employee has established business
relationships and performs the duties described in Section 1 of this Agreement
in the geographic area covered by a circle having a radius of fifty (50) miles
from the location set forth as item 1 on EXHIBIT "B" of this Agreement, and will
work predominately in such area while in the employ of CNB.
14.2 Employee covenants and agrees that for a period of one
(1) year after the termination of his employment with CNB without Cause,
Employee shall not, directly or indirectly, as principal, agent, trustee,
consultant or through the agency of any corporation, partnership, association,
trust or other entity or person, on Employee's own behalf or for others, provide
the duties described in Section 1 of this Agreement for any entity or person
conducting the Business of CNB within the geographic area covered by a circle
having a radius of fifty (50) miles from the location set forth on EXHIBIT "B"
of this Agreement.
14.3 The covenants contained in this Section 14 shall be
construed as agreements severable from and independent of each other and of any
other provision of this or any other contract or agreement between the parties
hereto. The existence of any claim or cause of action by Employee against CNB,
whether predicated upon this or any other contract or agreement, shall not
constitute a defense to the enforcement by CNB of said covenants.
15. Miscellaneous.
15.1 This Agreement constitutes and expresses the whole
agreement of the parties in reference to the employment of Employee by CNB, and
there are no representations, inducements, promises, agreements, arrangements,
or undertakings oral or written, between the parties other than those set forth
herein.
15.2 This Agreement shall be governed by the laws of the
State of Georgia.
15.3 Should any clause or any other provision of this
Agreement be determined to be void or unenforceable for any reason, such
determination shall not affect the validity or enforceability of any clause or
provision of this Agreement, all of which shall remain in full force and effect.
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<PAGE> 7
15.4 Time is of the essence in this Agreement.
15.5 This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their successors and assigns. This Agreement
shall not be assignable by any other parties hereto without the prior written
consent of the other parties.
15.6 This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute but a single instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
"Employee"
/s/ H.N. Padget, Jr. (SEAL)
________________________ ------------------------------------
Witness H. N. Padget, Jr.
ATTEST: "CNB"
CNB HOLDINGS, INC.
By:__________________________ By:/s/ W. David Sweatt
----------------------------------
_______________Secretary W. David Sweatt, Chairman
(CORPORATE SEAL) By: /s/ William Groce
----------------------------------
William Groce, Chairman of the
Compensation Committee
CHATTAHOOCHEE NATIONAL BANK
By:_________________________ By: /s/ W. David Sweatt
----------------------------------
_______________Secretary W. David Sweatt, Chairman
(BANK SEAL) By: /s/ William Groce
----------------------------------
William Groce, Chairman of the
Compensation Committee
7
<PAGE> 1
EXHIBIT 10.3
CNB HOLDINGS, INC.
AMENDED AND RESTATED NON QUALIFIED STOCK OPTION PLAN
A. PURPOSE AND SCOPE
The purpose of this Plan is to attract, retain and compensate key
personnel of the Company through the grant of options to purchase shares of the
Company's common stock.
B. DEFINITIONS
Unless otherwise required by the context:
1. "Board" shall mean the Board of Directors of the Company.
2. "Company" shall mean CNB Holdings, Inc., a Georgia corporation, or
any parent or subsidiary.
3. "Code" shall mean the Internal Revenue Code of 1986, as amended.
4. "Option" shall mean a right to purchase Stock granted pursuant to
the Plan.
5. "Option Price" shall mean the purchase price for Stock under an
Option, as determined in Section F below.
6. "Participant" shall mean an employee of the Company to whom an
Option is granted under the Plan.
7. "Plan" shall mean this CNB Holdings, Inc. Amended and Restated Non
Qualified Stock Option Plan.
8. "Stock" shall mean the common stock, One Dollar ($1.00) par value,
of the Company.
C. STOCK TO BE OPTIONED
Subject to the provision of Section M of this Plan, the maximum number
of shares of Stock that may be optioned or sold under the Plan is 40,000 shares.
Such shares may be treasury, or authorized, but unissued, shares of Stock of the
Company.
D. ADMINISTRATION
The Plan shall be administered by the Board. The Board shall be
responsible for the operation of the Plan with respect to participation in the
Plan by employees of the Company, and with respect to the extent of that
participation. The interpretation and construction of any provision of the Plan
by the Board shall be final. No member of the Board shall be liable for any
action or determination made by him in good faith.
<PAGE> 2
E. ELIGIBILITY
The Board may grant Options to any key employee (including an employee who
is a director or an officer) of the Company. Options may be awarded by the Board
at any time and from time to time to new Participants, or to then Participants,
or to a greater or lesser number of Participants, and may include or exclude
previous Participants, as the Board shall determine. Options granted at
different times need not contain similar provisions.
F. OPTION PRICE
The purchase price for Stock under each Option shall be the fair market
value of the underlying Stock on the date of the grant.
G. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by the Board and
shall be evidenced by agreements in such form as the Board shall from time to
time approve. Such agreements shall comply with and be subject to the following
terms and conditions:
1. Employment Agreement. The Board may, in its discretion,
include in any Option granted under the Plan a condition that the Participant
shall agree to remain in the employ of, and to render services to, the Company
for a period of time specified in the Option agreement following the date the
Option is granted. No such agreement shall impose upon the Company, however, any
obligation to employ the Participant for any period of time.
2. Time and Method of Payment. The Option Price shall be paid in
full in cash at the time an Option is exercised under the Plan. Otherwise, an
exercise of any Option granted under the Plan shall be invalid and of no effect.
Promptly after the exercise of an Option and the payment of the full Option
Price, the Participant shall be entitled to the issuance of a stock certificate
evidencing his ownership of such Stock. A Participant shall have none of the
rights of a shareholder until shares are issued to him, and no adjustment will
be made for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
3. Number of Shares. Each Option shall state the total number of
shares of Stock to which it pertains.
4. Option Period and Limitations on Exercise of Options. The
Board may, in its discretion, provide that an Option may not be exercised in
whole or in part for any period or periods of time specified in the Option
agreement. Except as provided in the Option agreement, an Option may be
exercised in whole or in part at any time during its term. No Option may be
exercised: (i) after the expiration of ten years from the date it is granted;
(ii) for a fractional share of Stock; or (iii) in the event the Company's
primary federal regulator determines that the Company's capital has then fallen
below such regulator's requirements.
H. TERMINATION OF EMPLOYMENT
In any Option agreement, the Board may provide that if a Participant ceases
to be employed by the Company for any reason, including, but not limited to, the
death of the Participant, his Options which have not been exercised as of the
date of termination shall immediately terminate and be of no further force and
effect.
I. NO OBLIGATIONS TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Participant to
exercise such Option.
<PAGE> 3
J. NONASSIGNABILITY
Options shall not be transferable and shall be exercisable only by such
Participant.
K. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
The aggregate number of shares of Stock available for Options under the
Plan, the shares subject to any Option and the price per share shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock subsequent to the effective date of the Plan resulting from (i)
a subdivision or consolidation of shares or any other capital adjustment; (ii)
the payment of a stock dividend; (iii) other increase or decrease in such shares
effected without receipt of consideration by the Company; or (iv) any merger,
recapitalization or other form of reorganization or corporate restructuring
involving the Company. An Option shall pertain, apply and relate to the
securities of any successor in the event of a corporate restructuring, subject
to appropriate adjustment.
L. AMENDMENT AND TERMINATION
The Board, by resolution, may terminate, amend or revise the Plan with
respect to any shares as to which Options have not been granted. Neither the
Board nor the Committee may, without the consent of the holder of an Option,
alter or impair any Option previously granted under the Plan. Unless sooner
terminated, the Plan shall remain in effect for a period of ten (10) years from
the date of the Plan's adoption by the Board. Termination of the Plan shall not
affect any Option previously granted. The Plan shall be binding upon the
Company, its successors and assigns.
M. AGREEMENT AND REPRESENTATION OF EMPLOYEES
As a condition to the exercise of any portion of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of such exercise that any shares of Stock acquired at exercise are being
acquired only for investment purposes and without any present intention to sell
or distribute such shares, if, in the opinion of counsel for the Company, such a
representation is required under the Securities Act of 1933, as amended, or any
other applicable law, regulation or rule of any governmental agency.
N. RESERVATION OF SHARES OF STOCK
The Company, during the term of this Plan, will at all times reserve and
keep available, and will seek or obtain from any regulatory body having
jurisdiction any requisite authority necessary to issue and to sell, the number
of shares of Stock that shall be sufficient to satisfy the requirements of this
Plan. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority deemed necessary by counsel for the Company for the
lawful issuance and sale of its Stock hereunder shall relieve the Company of any
liability in respect of the failure to issue or sell Stock as to which the
requisite authority has not been obtained.
O. EFFECTIVE DATE OF PLAN
The Plan shall be effective from the date that the Plan is approved by the
Board.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference of our report dated February
27, 1998, relating to the financial statements, and our accountants' review
report, dated May 12, 1998, relating to the reviewed financial statements, of
CNB Holdings, Inc., in Amendment No. 1 to the Registration Statement on Form
SB-2 and the Prospectus, and to the reference to our firm therein under the
caption "Experts."
/s/ BRICKER & MELTON, P.A.
BRICKER & MELTON, P.A.
Duluth, Georgia
May 27, 1998
